DO MACROECONOMIC VARIABLES HAVE A SYMMETRIC OR ASYMMETRIC EFFECT ON NON-PERFORMING LOANS? EVIDENCE FROM TURKEY

Abstract

In this study, the existence of the relationships between non-performing loans and macroeconomic variables for the monthly data of the Turkish banking sector between January 2005 and August 2018 were analysed through the Johansen cointegration test (1991), VECM Granger causality test (1988) and Hatemi-J asymmetric causality test (2012). The results of the Johansen cointegration test indicated that there are significant cointegration relationships between the variables in long-run. According to Granger causality test based on VECM, unidirectional causalities exists between non-performing loans, market capitalisation, exchange rate, industrial production index and foreign trade deficit. Except for market capitalization, those causality relationships were determined to be directed from the macroeconomic variables to NPLs. Under Hatemi-J (2012) asymmetric causality test, the results revealed that there exists asymmetric causality relation between NPLs and other macroeconomic variables excluding the consumer price index. It is possible to verify as a result of the analysis that the causality relationships between the variables differ and NPLs are affected as long as the macroeconomic conditions change. The results also revealed that the NPLs in the Turkish banking sector are different before and after the recent global financial crisis.