nep-ara New Economics Papers
on MENA - Middle East and North Africa
Issue of 2016‒08‒07
three papers chosen by
Paul Makdissi
Université d’Ottawa

  1. Dollarization, liquidity and performance: Evidence from Turkish banking By Caglayan, Mustafa; Talavera, Oleksandr
  2. Exchange Rate Pass-Through in a Small Open Economy: A Structural VAR Approach By Tunc, Cengiz; Kılınç, Mustafa
  3. Influence de la politique monétaire sur le taux long Quelques évidences empiriques, cas du Maroc By EL FAIZ, Zakaria; ZIANI, Manal

  1. By: Caglayan, Mustafa; Talavera, Oleksandr
    Abstract: Using a panel of Turkish commercial banks, we examine credit dollarization and its impact on banks' liquidity and profitability. Our estimates suggest that banks partially passthrough foreign denominated funds to borrowers in the form of foreign denominated credit. Furthermore, banks which lend in foreign denominated currency hold less liquid assets and experience higher return on assets. The results suggest that, when the domestic currency is stable, banks in Turkey manage their liquidity aggressively to earn higher returns on foreign denominated funds.
    Keywords: Financial Dollarization, Commercial Banks, Liquidity, Performance, Pass-through
    JEL: G20 G21
    Date: 2016–07–16
  2. By: Tunc, Cengiz; Kılınç, Mustafa
    Abstract: Pass through from the exchange rate developments to consumer prices could be an important dimension of inflationary dynamics in small open economies. In such economies, the proper identification of exchange rate pass through (ERPT) is crucial for monetary policy analysis. In this paper, we study ERPT in Turkey for the period of 2006m1-2015m6, which starts with the launch of explicit inflation-targeting regime. We first show that commonly used recursive VAR model generates unrealistic dynamics like effects of domestic variables on external variables in small open economies and as result ERPT estimate is biased. This bias comes from the unrealistic decline in energy prices in response to depreciation of currency for the given period in Turkey. We then use a structural VAR model with block exogeneity assumption. This model generates more realistic dynamics and suggests that ERPT is around 18 percent in Turkey. Overall, the analysis demonstrates the importance of using realistic model setup and checking the relationships across variables when estimating ERPT in small open economies.
    Keywords: Inflation, Exchange Rates, Pass-through, Turkey
    JEL: E31 E52 F31
    Date: 2016–02–02
  3. By: EL FAIZ, Zakaria; ZIANI, Manal
    Abstract: In an uncertain economic environment, long-term interest rates appear to be highly volatile and their sensitivity towards short-term interest rates appears to be still ambiguous. The aim of this work is to analyze this relationship, and to evaluate the impact of short-term interest rate on long-term interest rate in Morocco. We used a New Keynesian Model augmented with the term structure of interest rates, estimated with Bayesian methods on quarterly data for the period 2004-2015. The result shows that long-term interest rate increases in response to an increase in short term interest rate, which signifies that monetary policy in Morocco has the ability to influence long-term interest rates.
    Keywords: NKM Model, Monetary Policy, long-term interest rates, term structure
    JEL: E1 E12 E30 E43 E52
    Date: 2016–07

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