Structural Change and the Efficiency of Banking In Turkey: Does Ownership Matter?

In a period of increasing foreign bank entry, the popular question of “what does foreign bank entry bring to the Turkish banking sector?” can partly be answered with respect to the productivity effects. This paper aims to find the productivity change in the banking sector between 1990 and 2007 just before the global crisis. We are especially interested in the period beginning with 2001 after which the Turkish banking system has almost been flooded with foreign banks. Using a sample of 20 commercial banks, we attempt to find the Data Envelopment Analysis (DEA) type Malmquist Total Factor Productivity Change Index over the specified period. We also look at the source of this change decomposing this index into its mutually exclusive and exhaustive components of efficiency change and technological change. Additionally, we further decompose the technical efficiency change into pure technical efficiency change and scale efficiency change. The DEA results guide us in comparing the performances of banks of different ownership status (state, private and foreign banks) and of different sizeTurkish Banking Industry, Foreign Bank Entry, Globalization of Banking, Data Envelopment Analysis, Efficiency

Market Disciplining Role of Crisis on the Restructuring of the Turkish Banking Sector

This paper aims to find the productivity change in the banking sector between 1990 and 2006, with an emphasis to the period after 2001 crisis during which the Turkish banking system experienced a structural change. Using DEA, we find the Malmquist TFP Change Index and its mutually exclusive and exhaustive components of efficiency and technological changes over time. Additionally, we further decompose the technical efficiency change into pure technical and scale efficiency changes. The productivity of the banking sector is found out to have increased, the main reason being technological improvement rather than efficiency increase. For the cases of productivity decline, however, the changes come from the efficiency side rather than technology. An analysis with respect to the ownership status revealed that foreign banks were the most efficient group until 2001 after which state banks captured the first place. We attribute this change to the inflation accounting practice as well as better management of state banks with less political intrusion. The analysis with respect to bank size reveals that before 2000, the most efficient bank group was the medium-scale banks (the banks mainly purchased by foreign banks) followed by small banks while the efficiency scores converged after 2001.Turkish Banking Sector; Data Envelopment Analysis; Efficiency; Productivity; Post-Crises Period

Globalization of Turkey’s Banking Sector: the Determinants of Foreign Bank Penetration in Turkey

Motivated by the increased importance of foreign bank entry, this paper takes a look at the issue from the perspective of both foreign entrants and the host country. What are the conditions that make the host country market attractive to foreign entrants? What changes in the home country motivate foreign banks to expand abroad? Attracted by the “pull” and “push” factors, foreign banks enter into the banking sector of the host country resulting in both benefits and costs to the domestic sector. Having given the reasons and the effects of foreign entry in a theoretical framework, this study attempts to find out any match of the theory with the evidence.Foreign Bank Entry; Internationalization of Banking

What Determines the Banking Sector Performance in Globalized Financial Markets: The Case of Turkey?

This study attempts to give an insight about the trend in the performance of the Turkish banking sector by conducting a panel data fixed effects regression analysis. The results reveal that efficiency change is negatively related to the number of branches. We find a positive relationship between loan ratio and the performance indices efficiency and efficiency change. Furthermore, bank capitalization is positively related to efficiency change. Interestingly however, return on equity is not statistically significant in explaining any of the efficiency measures. There is also no robust relationship between foreign ownership and efficiency. Finally, restructuring attempts in post-crises epoch robustly account for the improvement in efficiency scores in recent years.Panel Data Analysis; Efficiency; Productivity; Turkish Commercial Banks; Foreign Ownership

Why Do Foreign Banks Invest In Turkey?

Sound macroeconomic policies, increasing global liquidity and higher real returns in developing countries played an important role in canalizing capital towards developing markets. Recent improvement in the developing Turkish economy brought the issue of foreign entry to the foreground. High growth potential backed by an increasing population, falling inflation rates and the birth of the mortgage sector made Turkey an ideal place to expand into. This article is not concerned about whether foreign entry is good nor does it discuss the subsequent effects. Rather, it attempts exclusively to shed light on the motivations behind entry to Turkey utilizing recent entry cases.Globalization of Banking; Turkish Banking Industry; Foreign Bank Entry

Essays on Bayesian Analysis of Time Varying Economic Patterns

__Abstract__ Knowing the history of your topic of interest is important: It teaches what happened in the past, helps to understand the present, and allows one to look ahead in the future. Given my interest in the development of Bayesian econometrics, this thesis starts with a description of its history since the early 1960s. My aim is to quantify the increasing popularity of Bayesian econometrics by performing a data analysis in the sense of measuring both publication and citation records in major journals. This will give a concrete idea about where Bayesian econometrics came from and in which journals its papers appeared. With this information, one will be able to predict some future patterns. Indeed, the analysis indicates that Bayesian econometrics has a bright future. I also look at how the topics and authors of the papers in the data set are connected to each other using the bibliometric mapping technique. This analysis gives insight in the most important topics examined in the Bayesian econometrics literature. Among these, I find that a topic like unobserved components models and time varying patterns has shown tremendous progress. Finally, I explore some issues and debates about Bayesian econometrics. Given that the analysis of time varying patterns has become an important topic, I explore this issue in the following two chapters. The subject of Chapter 3 is twofold. First, I give a basic exposition of the technical issues that a Bayesian econometrician faces in terms of modeling and inference when she is interested in forecasting US real GDP growth by using a time varying parameter model using simulation based Bayesian inference. Having observed particular time varying patterns in the level and volatility of the series, I propose a time varying parameter model that incorporates both level shifts and stochastic volatility components. I further try to explain the GDP growth series using survey data on expectations. Doing posterior and predictive analyses, the forecasting performances of several models are compared. The results of this chapter may become an input for more policy oriented models on growth and stability. In addition to output growth stability, price stability is also an important policy objective. Both households and businesses are interested in the behavior of prices over time and follow the decisions of policymakers in order to be able to make sound decisions. Moreover, policymakers are interested in making inflation forecasts to be able to make sound policy decisions and guide households and businesses. Therefore, inflation forecasting is important for everybody. I deal with this topic in Chapter 4. In this chapter, I explore forecasting of US inflation via the class of New Keynesian Phillips Curve (NKPC) models using original data. I propose various extended versions of the NKPC models and make a comparative study based on posterior and predictive analyses. I also show results from using models that are misspecified and from using survey inflation expectations data. The latter is done since most macroeconomic series do not contain strong data evidence on typical patterns and using survey data may help strengthening the information in the likelihood. The results indicate that inflation forecasts are better described by the proposed class of extended NKPC models and this information may be useful for policies such as inflation targeting. Section 1.2 summarizes the contributions of this thesis. Section 1.3 presents an outline of the thesis and summarizes each chapter

Bayesian Forecasting of US Growth using Basic Time Varying Parameter Models and Expectations Data

__Abstract__ Time varying patterns in US growth are analyzed using various univariate model structures, starting from a naive model structure where all features change every period to a model where the slow variation in the conditional mean and changes in the conditional variance are specified together with their interaction, including survey data on expected growth in order to strengthen the information in the model. Use is made of a simulation based Bayesian inferential method to determine the forecasting performance of the various model specifications. The extension of a basic growth model with a constant mean to models including time variation in the mean and variance requires careful investigation of possible identification issues of the parameters and existence conditions of the posterior under a diffuse prior. The use of diffuse priors leads to a focus on the likelihood fu nction and it enables a researcher and policy adviser to evaluate the scientific information contained in model and data. Empirical results indicate that incorporating time variation in mean growth rates as well as in volatility are important in order to improve for the predictive performances of growth models. Furthermore, using data information on growth expectations is important for forecasting growth in specific periods, such as the the recession periods around 2000s and around 2008

Why Do Foreign Banks Invest In Turkey?

Sound macroeconomic policies, increasing global liquidity and higher real returns in developing countries played an important role in canalizing capital towards developing markets. Recent improvement in the developing Turkish economy brought the issue of foreign entry to the foreground. High growth potential backed by an increasing population, falling inflation rates and the birth of the mortgage sector made Turkey an ideal place to expand into. This article is not concerned about whether foreign entry is good nor does it discuss the subsequent effects. Rather, it attempts exclusively to shed light on the motivations behind entry to Turkey utilizing recent entry cases