The Effect of Bank Size and Bank Capital on the Bank Lending Channel for Turkish Banks

This study investigates the existence of a bank lending channel in Turkey over the estimation period 2002Q4-2008Q4. Consistent with the bank lending channel, I search for evidence that small, undercapitalized banks are more sensitive to changes in monetary policy than large, well-capitalized banks. Results suggest that small, undercapitalized banks find it harder to raise time deposits than large, well-capitalized banks which support the existence of a bank lending channel however the insignificant relationship between the change in the monetary policy indicator (Central Bank overnight rates) and the growth rate of bank loans does not support the existence of a bank lending channel