The effect of funds provided by participation banks on the real economy

This thesis study examines the effect of the funds provided by participation banks in Turkey on the real economy across Turkey and regionally. The first aim of the thesis is to examine the effects of the funds provided by participation banks on the real economy on a regional basis. In order to reveal the short and long term effects on the gross domestic product, exports and imports with the funds provided at the regional level within the scope of this purpose; panel pooled mean group estimator and in order to take into account the role of interaction between regions; spatial panel data analysis was used. According to the findings obtained from the analysis, it is seen that while the funds provided by participation banks have a positive effect on exports in the short term, they do not have a significant effect on imports and GDP. In the long term, it can be stated that the funds provided have an increasing effect on exports, imports and GDP. However, the results differ at the regional level. Another purpose of the thesis is to reveal how the effect of funds provided by participation banks on the economy differs across Turkey, in terms of economic expansion and contraction periods. In accordance with this purpose, funds provided by participation banks and their effects on industrial production index, real sector confidence index, exports and imports across Turkey were examined with nonlinear Hansen Seo cointegration test and threshold variable VECM (TVECM) model. According to the results obtained from the analysis, while in the regime that the amount of funds provided is low, increase in the amount of funds increases import, export and real sector confidence index; no significant effect was found on the industrial production index. In the regime that the amount of funds provided is high, increase in the amount of funds increases import, export, industrial production index and real sector confidence index. KEYWORDS: Participation Banking, Islamic Banking, Real Economy, Panel Data Analysis, Time Series Analysis