The effects of hot money inflows on the balance sheet of deposit banks

Hot Money, although it has no generally accepted definition in economic literature, is among the most prominent topics especially in developing markets. Though the necessity of hot money for an economy is highly debatable, it is of great importance regarding the development of emerging markets and economic mobility. On the other hand, leaving hot money results in serious crisis in the countries dependent on hot money. Described as speculative, short-term basis, excessively volatile and mobility, hot money makes itself evident in the form of stocks, portfolio investments, tendency for short term bonds, short run credits issued to the banks and invesments inbank deposits.Hot money becomes even more evident with the development of globalization notion which can be defined as entegration of world economy. In the economies exposed to hot money, real estate and stocks are mostly overpriced and bubbles are prevalent. Hot Money shows mobility at the moment of profit sliding to the other side. Deregulation in the emerging markets which are dominated by inputs and outputs is very large. In these countries while the the short-term capital inflows eases the country's economy, capital outflows brings economic crisis. In this study, the effects of hot money inflows on consolidated balance sheets of Turkish Deposit Banks are statistically analyzed. How and in what directions the hot money, entered the country between the years of 1986-2011, affects (some of) the assest and liabilities located in the consolidated balance sheets, income statements and off-balance accounts of the banks are tested and investigated statistically. Key Word : Hot Money, Deregulation, Speculative, Deposits, Consolidated, Balance Sheet, Globalization