Non-core Liabilities and Credit Growth

Non-core Liabilities and Credit Growth

Title : Non-core Liabilities and Credit Growth
Number : 13/24
Author(s) : Zübeyir Kılınç, Hatice Gökçe Karasoy, Eray Yücel
Language : English
Date : May 2013
Abstract : The composition of bank liabilities has captured a lot of attention especially after the global financial crisis. It is argued that movements particularly in the non-core liabilities may reflect the stage of financial cycle. The literature claims that banks usually fund their credits with core liabilities, which grow with households’ wealth, but when there is a faster growth in credits compared to deposits, the banks resort to non-core liabilities to meet the excess demand. Despite this significant role assumed to be played by the non-core liabilities, there are not too many country-specific studies on this issue. This study analyzes the relationship between the non-core liabilities and credits within a small open economy, namely Turkey. It investigates the relationship under alternative settings and reveals a robust relationship between credits and non-core liabilities under all frameworks. The study also verifies that elevated demand for credit may induce some increase in the non-core liabilities. Finally, the relationship is affirmed in the long-run.
Keywords : Core Liabilities, Non-core Liabilities, Credits, Small Open Economy, VAR, VECM
JEL Codes : E44; E51

 

Non-core Liabilities and Credit Growth
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