Analysis of the Relationship between Consumer-Commercial Loan Interest Rates and Non-Performing Loans in Turkey by Employing Asymmetric Adjustment

Abstract

Changes in interest rates are one of the macroeconomic factors having impacts on non-performing loan ratio which signals to increased credit risk in the banking sector. The objective of this study is to investigate the relationship between loan interest rates and non-performing loan ratio for Turkey by using monthly data covering the period of 2012:07-2018:12 and by employing the TAR-MTAR cointegration tests proposed by Enders and Siklos (2001), which allows the long-run asymmetric adjustment. The findings don't support the impact of both consumer and commercial loan interest rates on non-performing loans, implying that there is no long-run relationship between loan interest rates and non-performing loans in the relevant period for Turkey.