The Effect Of Banking Loans To Construction Sector On Economic Growth: The Case Of Turkey

Abstract

The issue of the source of economic growth has been included in many researches and discussions from the past to the present. While the effect of financial markets on economic growth constitutes a separate research area, banks appear as institutions that affect economic growth in Turkey. The construction industry, which is one of the cornerstones of economic growth, frequently needs financing due to its structure and characteristics. It provides this financing need mostly through banks that play a very important role in financial markets. This study investigates the relationship between the economic growth and bank loans given to the construction sector in Turkey. In this context, bank loans given to the construction sector and economic growth data between 2004-2019 were used. While "Gross Domestic Product Growth" was used to represent economic growth, "Growth in Bank Loans to Construction Sector" was used for bank loans given to the construction sector. To answer the research question, we employ Zivot and Andrews unit root test, Granger causality analysis and vector autoregression model analyses. Findings indicate that there is a bi-directional causality between variables. The economic growth positively affects the growth in bank loans given to the construction sector, while the growth in bank loans given to the construction sector negatively affects the economic growth.