The relationship between foreign trade loans provided by banks and foreign trade volume: Evidence from Turkey

Foreign trade activities are one of the basic economic components for countries. Similarly, foreign trade volume is one of the dominant macroeconomic dynamics for national economies. As a matter of fact, the macroeconomic performance of countries tends to be significantly affected by foreign trade activities. One of the key mechanisms for the maintenance and development of foreign trade for a country is banking activities. Banks basically fulfill this role by providing various foreign trade loans to the establishments engaged in foreign trade activities. Foreign trade credits provided by banks include applications such as import and export credits. From this point of view, it is expected that there will be a strong relationship between the import and export credits provided by the banks and the foreign trade volume of the countries. This study investigates the causality relationship between foreign trade loans (export and import loans) provided by banks operating in Turkey and Turkey's foreign trade volume, and the possible impact of these loans on Turkey's foreign trade volume. The period examined in the study is between February 2013 and August 2021, and the data used within the empirical study were taken on a monthly basis. In our study, all banks providing foreign trade loans: including deposit banks, participation, development and investment banks and their branches abroad, were included in the study, while the banks and financial institutions that did not provide foreign trade loans were not included in the study. In the study, the "Granger Causality Test" was applied in order to determine the existence of causality between foreign trade loans and foreign trade volume, and the quality and quantitative characteristics of this possible causality relationship. "Least Squares time series regression" was used to determine the possible effect of foreign trade loans (export and import loans) provided by banks operating in the Turkish banking sector on Turkey's foreign trade volume, the statistical significance of this potential effect, and the direction and numerical size of the effect. method has been applied. As a result of the study, a statistically significant Granger causality relationship at the level of 5% from foreign trade loans to foreign trade volume was determined according to the Granger Causality Test results. Similarly, a statistically significant Granger causality relationship was found at the level of 5% from foreign trade volume to foreign trade loans. According to the Granger causality test findings, there is a reciprocal causality relationship at the 5% statistical significance level between the foreign trade loans provided by the banks operating in the Turkish banking sector and Turkey's foreign trade volume. On the other hand, according to the Least Squares series regression results, it was found that there is a statistically significant and positive effect of foreign trade loans provided by banks in Turkey on Turkey's foreign trade volume. Keywords: Foreign Trade, Banking, Foreign Trade Loans, Foreign Trade Volume