A Stress testing framework for the Turkish banking sector: an augmented approach

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2014
Çakmak, Bahadır
This thesis proposes a suite of models, which are a set of independent but complementary models, for conducting a macro stress test of credit risk for the Turkish banking sector. First model links financial stability to macroeconomic stability and estimates the relationship between macroeconomic variables and macrofinancial variables within a VAR framework. Second model employs static and dynamic panel data techniques to regress nonperforming loans to these macroeconomic and macrofinancial variables. With a view to the possible nonlinearities inherited in macroeconomic and financial series, nonlinear VAR and panel data models are considered. We also use alternative scenarios to test resilience of the banking sector. In a nutshell, we find that nonlinear models perform better than linear models and the banking sector is resilient to external shocks under the proposed scenarios.

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Citation Formats
B. Çakmak, “A Stress testing framework for the Turkish banking sector: an augmented approach,” Ph.D. - Doctoral Program, Middle East Technical University, 2014.