The effects of financial liberalization on Turkish banking sector

The leading countries of the world thought that accelerating economic growth would be limited with local resources. Therefore they have focused on financial liberalization policies since the 1970s to get access on more financial resources. Looking at the summary results of financial liberalization practices in this process, it has been observed that international free capital flows can contribute positively to the growth of developing countries but on the other hand, they can also cause exchange rate fluctuations, current account deficits and financial and economic crises, especially banking crises, due to their highly volatile nature. In this study, the effects of financial liberalization on the profitability criteria of the banking sector in Turkey which is chosen as an example for developing countries are analyzed. The causality relationship between financial liberalization and banking sector profitability for the period 1999-2019 is examined with the Toda-Yamamoto method.