The relationship between concentration in the Turkish banking sector and economic growth

The meaning, scope and place in the economic of the banking concept which was founded in16th century has changed considerably to 21st century. Thanks to globalizing, the banking sector has become an integral whole with the national economies. In this context, the main purpose of this study is to analyze the relationship between economic growth and the concept of concentration which examines the sector structure and functioning of the banking sector. In this study, the relationship between concentration in Turkish banking sector and economic growth and growth of agriculture, industry and services sub-sectors were investigated. 2000-2017 annual data covering the period banking and economic growth were obtained from the database of the Central Bank of the Republic of Turkey, Turkey Statistical Institute and Head of the Republic of Turkey Presidential Strategy and Budget. Concentration levels in the banking sector were measured by the N-firm concentration ratio and the Herfindahl-Hirschman Index. The relationship between growth and concentration was estimated by two stage least squares 2SLS method. As a result, a positive correlation was observed between the concentration rate of Herfindahl-Hirschman index and economic growth rate in the banking sector. Moreover, it is concluded that there is a positive relationship between Herfindahl-Hirschman index concentration rate and industrial sector growth rate, while there is a negative relationship with services sector growth rate.