The analysis of consumer loans' expansion in Turkish banking sector in the post 2001 period and its effect on trade balance

The credit mechanism is an indispensable financial instrument to support economic growth and development. When the credit growth in Turkey is analyzed in recent years, it is seen that the most important increase was realized in retail loan products, and especially with the transformation in banking sector after 2001, consumer loans reached a significant weight in bank assets. The increase in consumer loan volume affects household spending, consumption, behavior and liabilities, while increasing the interest of producers and banks in households. On the analysis of households' behavior related to the increasing volume and the use of retail loans and their possible socio-economic effects; community behavior and psychology are becoming more important in terms of the allocation of resources and the balance of the national economy. The increase in loans provided by banks supports the supply side of the economy in terms of financing investments and the demand side of the economy with the financing of consumers. In this study, the loans extended by banks to retail customers in the period 2003-2019 were analyzed and relationship between consumer loans and foreign trade deficits was evaluated with quarterly data by using econometric analysis methods under the presence of other control variables. The variables were subjected to ARDL limit test and the sensitivity of foreign trade deficits to retail loans volume was tested for both long and short term. Our findings reveal that the increase in total consumer loans increases the foreign trade deficit in the long term while the increase in commercial loans decreases it. As for the sub-products of consumer loans, the increase in general purpose loans and vehicle loans increase the foreign trade deficit in the long term. The increase in housing loans and credit card loans do not have a statistically significant effect on foreign trade deficit.