Industrial Production as a Credit Driver in Banking Sector: An Empirical Study With Wavelets

This paper examines the timescale effects of industrial production on credits volume at banks. By using industrial production in Turkey and credit volumes of Turkish banks from 3/1992-12/2006, this study employs wavelet filters to estimate multi-scale causality for scaled time series. The original data is transformed by the wavelet filter up to 5 time scales. The first wavelet coefficient captures oscillations with a period length 3 to 6 months. Equivalently, the consequent wavelets capture oscillations with a period of 7-12, 13-24, 25-48 and 49-96 months, respectively. The results of multi-scale granger causality test show that the industrial production is effective on credits volume upto 24 months, while the credits volume starts to affect industrial production after 2 years. This paper has originality in presenting multi-scale effects of industrial production as a credit driver by using wavelet analysis with Turkish data.

[1]  A Wavelet Analysis of MENA Stock Markets , 2005 .

[2]  P. Phillips.  Testing for a Unit Root in Time Series Regression , 1988 .

[3]  H. Broadman,et al.  Finance and Growth: Schumpeter Might Be Right , 1993 .

[4]  A. Afsar.  THE CAUSALITY BETWEEN FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH IN TURKEY , 2008 .

[5]  Aleš Bulíř.  Income Inequality: Does Inflation Matter? , 2001, IMF Staff Papers.

[6]  Todd R. Ogden,et al.  Wavelet Methods for Time Series Analysis , 2002 .

[7]  Efthymios G. Tsionas,et al.  Financial development and economic growth: evidence from panel unit root and cointegration tests , 2004 .

[8]  John Knight,et al.  Oxford Bulletin of Economics and Statistics , 2006 .

[9]  Gary G. J. Lee.  Contemporary and long‐run correlations: A covariance component model and studies on the S&P 500 cash and futures markets , 1999 .

[10]  Tuck Cheong Tang.  An examination of the causal relationship between bank lending and economic growth: evidence from ASEAN , 2005 .

[11]  J. Schumpeter,et al.  The Theory of Economic Development , 2017 .

[12]  W. Fuller,et al.  LIKELIHOOD RATIO STATISTICS FOR AUTOREGRESSIVE TIME SERIES WITH A UNIT ROOT , 1981 .

[13]  H. Patrick.  Financial Development and Economic Growth in Underdeveloped Countries , 1966, Economic Development and Cultural Change.

[14]  Lance E. Davis,et al.  The Investment Market, 1870–1914: The Evolution of a National Market , 1965, The Journal of Economic History.

[15]  Velimir Šonje.  FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH , 2002 .

[16]  Chaido Dritsaki,et al.  The Causal Relationship between Stock, Credit Market and Economic Development: An Empirical Evidence for Greece , 2005 .

[17]  S. Johansen.  STATISTICAL ANALYSIS OF COINTEGRATION VECTORS , 1988 .

[18]  F. In,et al.  The Hedge Ratio and the Empirical Relationship between the Stock and Futures Markets: A New Approach Using Wavelet Analysis , 2006 .

[19]  S. Johansen,et al.  MAXIMUM LIKELIHOOD ESTIMATION AND INFERENCE ON COINTEGRATION — WITH APPLICATIONS TO THE DEMAND FOR MONEY , 2009 .

[20]  C. Granger.  Investigating causal relations by econometric models and cross-spectral methods , 1969 .

[21]  桜井 欣一郎.  Financial aspects of economic development of Japan, 1868-1958 , 1964 .

[22]  Zhenhui Xu.  Financial development, investment, and economic growth , 2000 .

[23]  M. Kar,et al.  Financial Development and Economic Growth in Turkey: Further Evidence on the Causality Issue , 2000 .

[24]  Greg Tkacz,et al.  Estimating the Fractional Order of Integration of Interest Rates Using a Wavelet OLS Estimator , 2001 .

[25]  Franklin Allen,et al.  Sustained Economic Growth and the Financial System , 2004 .

[26]  P. Guidotti,et al.  Financial Development and Economic Growth , 1992 .

[27]  A. F. Darrat,et al.  Are Financial Deepening and Economic Growth Causally Related? Another Look at the Evidence , 1999 .