The impact of participation banks on macroeconomic indicators in Turkey

Abstract

Abstract. Demand for participation banks and participation banking instruments in Turkey is increasing its importance day by day. Along with the increase in interest for theinterest-free financial instruments in international financial markets after the second half of the 20^th century, demand for interest-free financial instruments in Turkey over the past two decades has increased as well. However, the share of the Participation Banks in the financial system of Turkey’s economy is already only 5 %, which indicates that sufficient financial depth has not been achieved in this respect. From this point of view,in this study development of participation banking in Turkey and in the world and impacts of the funds extended by participation banks on real macroeconomic indicators (exports, gross domestic product, employment, household consumption expenditures and investments) are analyzed with the panel data analysis methodusing unbalanced panelquarterly data covering periods between 2010- 2017. The results of the analyses have shown that although its share in the financial system is below the expected level, funds extended by participation banks affect the indicators related to foreign trade, employment, supply and demand side of Turkey’s economy positively.

Keywords. Participation banks, Macroeconomics indicators, Panel analysis, Heteroscedasticity, Autocorrelation.

JEL. B22, C50, E50.