The impact of economic growth, inflation, and exports on domestic credit to the private sector in Turkey

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Type of the article: Research Article

Abstract
This study analyzes the causal relationships between economic growth, inflation, exports, and domestic credit to the private sector in Turkey using annual data covering the period from 1990 to 2024, obtained from the World Bank and the Turkish Statistical Institute. The empirical strategy is based on a Vector Autoregressive (VAR) modeling framework combined with the Toda–Yamamoto Granger causality approach, with the long-run interactions among the variables further examined through Johansen cointegration analysis. This integrated methodology allows for a comprehensive assessment of both short-run dynamics and long-term equilibrium relationships in the Turkish macro-financial system. The empirical findings from the Toda–Yamamoto causality tests reveal statistically significant causal effects running from exports of goods and services, economic growth, and inflation to domestic credit to the private sector. Specifically, exports (EXGS), GDP growth (GDPG), and inflation (INF) each exert a meaningful influence on domestic private sector credit (DOCR), indicating that historical movements in these macroeconomic variables possess substantial explanatory and predictive power for credit dynamics. These results underscore the importance of real economic activity, external trade performance, and price stability in shaping the evolution of financial intermediation in Turkey. From a policy perspective, the results imply that maintaining export competitiveness, promoting stable and inclusive economic growth, and ensuring low and predictable inflation are essential for improving private sector credit access, reinforcing financial sector performance, and fostering sustainable economic development and macroeconomic stability in Turkey.

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    • Figure 1. Trends of key macroeconomic indicators (1990-2024)
    • Figure 2. Inverse roots of AR characteristic polynomial
    • Table 1. Descriptive statistics
    • Table 2. Unit root test outcomes
    • Table 3. VAR lag order selection criteria
    • Table 4. VAR residual serial correlation LM tests
    • Table 5. VAR residual normality tests (Jarque-Bera)
    • Table 6. VAR residual heteroskedasticity tests
    • Table 7. Identifying long-run links with the Johansen cointegration test
    • Table 8. Toda–Yamamoto Granger causality test results
    • Conceptualization
      Zeynab Giyasova, Aynur Jabbarova, Mustafa Kemal Oktem, Fidan Safarova
    • Data curation
      Zeynab Giyasova, Rashad Salahov, Mustafa Kemal Oktem
    • Investigation
      Zeynab Giyasova, Rashad Salahov, Aynur Jabbarova, Mustafa Kemal Oktem
    • Methodology
      Zeynab Giyasova, Mustafa Kemal Oktem
    • Project administration
      Zeynab Giyasova, Aynur Jabbarova, Fidan Safarova
    • Resources
      Zeynab Giyasova, Rashad Salahov, Mustafa Kemal Oktem, Fidan Safarova
    • Software
      Zeynab Giyasova, Mustafa Kemal Oktem
    • Visualization
      Zeynab Giyasova, Rashad Salahov
    • Writing – original draft
      Zeynab Giyasova, Rashad Salahov, Aynur Jabbarova
    • Formal Analysis
      Rashad Salahov, Fidan Safarova
    • Validation
      Rashad Salahov, Aynur Jabbarova, Mustafa Kemal Oktem, Fidan Safarova
    • Funding acquisition
      Aynur Jabbarova, Fidan Safarova
    • Supervision
      Mustafa Kemal Oktem, Fidan Safarova
    • Writing – review & editing
      Mustafa Kemal Oktem, Fidan Safarova
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Investment Management and Financial Innovations