The impact of the disinflation program on the structure of the Turkish banking sector

Abstract

This paper uses an unbalanced panel of observations on Turkish commercial banks during 1988-1999, attempts to define the structure of the banking sector through descriptive statistics and panel regressions and forecasts the changes that will take place in the banking system based on these. We follow the methodology of Demirgüç and Huizinga (1999) closely, but instead of a cross-country analysis, we focus on issues pertaining to Turkey undergoing the ambitious three-year stabilization program. The descriptive analysis of the commercial banks operating in Turkey during 1988-1999 points out to the following facts: the chronic inflation of the past 15 years and the resulting high real interest rate have displaced income.