Asymmetric information in new Keynesian monetary policy: An application on Turkish banking sector

Asymmetric information is expression of having different level of knowledge phenomenon. New Keynesian economics makes explanations regarding to how economics processes are structured with asymmetric information approach which is one of its fundamental assumptions. One of the explanations is about the determination of loan supply under asymmetric information. Credit rationing is one of the important problems that asymmetric information causes in the banking sector. Rationing is the denial of the loan application by credit institutions, although loaners in credit market are willing to become borrower by paying more interest. New Keynesian economics give a great importance to banks in the process of providing loans and highlights that, the occurred problems from the asymmetric information in banking sector is going to bring significant costs to the economy. The aim of this study is to examine the credit rationing is valid or not after the restruction period in Turkish banking sector. In this context, the ratio of three months non-performing loans to total loans and the share of total loans in total assets which belongs to 2002:04-2011:02 periods was used. The causality relationship between variables were analyzed by linear Toda and Yamamoto method (1995) and Hacker and Hatemi-J (2006) bootstrap method. According to the results, there is no relationship between variables and credit rationing is not valid for the Turkish banking sectorKeywords: Asymmetric Information, Credit Rationing, Turkish Banking Sector