DID CREDIT CRUNCH CAUSE A COLLAPSE IN PRIVATE INVESTMENT?: TURKEY CASE
Birgül CAMBAZOĞLU,Sevcan GÜNEŞ
The economists have focused on credit crunch since 1990’s. The economists are
not in consensus as to what constitutes the credit crunch. The differences in
definitions come from the causes of credit contraction. Credit crunch is generally
accepted as an enormous decline period in credit supply. Although the credit
crunch is seen as a supply phenomenon, some economists define it as a demand
issue. Investment declines significantly as result of an increase in credit rationing.
The purpose of this study is to investigate the dependence of private investment
on money and credit supply in Turkey. In other words, we want to quantify the
effect of credit contraction in the banking sector on private fixed investment.
VAR model is used to identify the existence of credit crunch through four
economic variables: Private fixed investment, money stock (M2), bank loans to
private sector and interest rate of commercial loans for the period ranging from
2003:01 to 2010:08. According to results of this study, it can be said that the
credit crunch that we dealt with as a supply phenomenon leads to an investment
collapse (slump) in Turkey.
The paper proceeds as follows: Section I provides theoretical background of credit
channels and credit crunch. Section II summarizes recent empirical studies.
Section III describes variables and discusses the empirical findings of the model.
Section IV provides concluding remarks.
Credit Crunch, Investment Slump, Turkey, VAR
Bernanke, Ben S., Cara S. Lown and Benjamin M. Friedman (1991), “The Credit