Economic effects of bank loans: An analysis of the causality relationship between consumer loans, SME loans and commercial loans and economic growth

The banking sector has a significant share in economic growth. There is a multidirectional relationship between bank loans and economic growth. Today, small and medium-sized enterprises (SMEs) are of great and increasing importance because SMEs constitute a large share of enterprises both in Turkey and the world. While bank loans support economic growth, the same relationship is also valid for the opposite situation. This study tests the relationship between bank loans and economic growth. The study analyzes quarterly data for the period between 2010 Q1 - 2022 Q4 in Turkey. In the analysis phase of the study, Augmented Dickey Fuller (ADF) and Phillips Perron (PP) Unit Root Tests were used to examine the relationship between bank loans and economic growth, and Toda-Yamamoto test was used to find the causality relationship and its direction. According to the Toda-Yamamoto causality test results, there is a causality relationship between economic growth and SME loans, commercial loans and consumer loans. In other words, economic growth has an effect on the volume of loans extended by banks. Keywords: Bank Credit, Economic Growth, Toda-Yamamoto Causality Test