Research

Publications

Baziki S.B., Nieto M., Turk-Ariss R. (2023). Sovereign Portfolio Composition and Bank Risk: The Case of European Banks, Journal of Financial Stability, 65(April).

Baziki S.B., Kilic Y., Yilmaz M.H. (2022). Consumer Loan Rate Dispersion and the Role of Competition: Evidence from the Turkish Banking Industry, Central Bank Review, 22(1), 27-47.

Baziki S.B., Norbäck P.-J., Persson L., Tåg J. (2017). Cross-border Acquisitions and Restructuring: Multinational Enterprises and Private Equity firms, European Economic Review, 94, 166-184.

Baziki S.B. (2008). “The Economic Importance of the Emerging Giants.” In Global Imbalances and the Evolving World Economy, ed. Jane Sneddon Little. Boston, Federal Reserve Bank of Boston

Ongoing Research

Loan-to-Value Caps, Bank Lending and Spill-over to General-Purpose Loans, 2021, CBRT Working Paper, No. 21/23, August. [link]

joint with T.Çapacıoglu (CBRT).

This paper studies the effect of the introduction of and a subsequent easing in residential credit loan-to-value (LTV) ratio caps on bank lending and borrowers' loan usage with a unique and comprehensive bank-linked individual credit data set in a large emerging economy. We first show that following the introduction of an LTV cap, banks that were previously lending at rates above the limit have reduced residential lending, as targeted by the policy. We find that banks change their balance sheet composition as a response, replacing the reduction in residential lending with higher commercial loans and general-purpose loans issued to new residential borrowers. Next we document that following the easing in the LTV ratio cap, previously constrained residential borrowers tend to take out more general-purpose credit compared to unconstrained residential borrowers, exhibiting a form of "credit spillover". This finding suggests that individuals may be purchasing more expensive/better quality homes than they otherwise could have, implying a "flight to quality" in the residential market in line with the easing in the LTV cap. These outcomes of changes in a widely used macroprudential policy suggests that LTV policies alone are successful in impacting the credit cycle and house price movements but may not necessarily impact overall indebtedness.

Macroprudential Policies, Credit Guarantee Schemes and Commercial Loans: Lending Decisions of Banks, 2021, CBRT Working Paper, No. 21/20, August. [link]

joint with T.Çapacıoglu (CBRT).

We study the effect of two counter-cyclical credit policies on banks’ lending decisions using a unique matched bank-firm-loan micro level data. These two policy actions; the implementation of commercial real estate loan-to-value (LTV) ratio and an expansion of a collateral guarantee scheme, stand out as they give banks the freedom of choice over which customers would be subject to the policy and to what degree. When faced with a tightening LTV policy banks elect to issue loans above the LTV cap to firms with better credit history and with whom they had a longer established relationship while charging higher interest rates. Firms constrained by the policy see an increase in their other borrowing while the policy is in effect, suggesting the existence of credit spillover across loan types. In the second policy, banks again prefer firms with healthier credit histories and with whom they have a longer relationship into the credit guarantee scheme. In contrast to the existing literature, we do not see a preference for riskier firms under the scheme. At the same time, among the recipients of scheme loans, those with stronger relationships but relatively lower past credit performance have larger amounts of loans. Scheme loans are issued for larger amounts, longer periods and at higher interest rates compared to loans issued to non-participating firms during the same period. Finally, we show that the increase in scheme utilization has resulted in lower other corporate credit and general-purpose loans in banks with larger utilization rates.

Bank Lending and Maturity: the Anatomy of the Transmission of Monetary Policy, 2020, CBRT Working Paper, No. 20/05, March. [link]

joint with T.Çapacıoglu (CBRT).

We study the effects of monetary policy decisions on banks’ loan issuance and maturity decisions using a unique matched firm-bank-loan level granular database. We find that changes in the policy rate impact both credit and maturity channels - an increase of 100 basis points reduces commercial loan volumes by 1.6% and maturities by 1.2%, with tighter monetary policy having a larger effect on both. Small banks, banks with relatively weaker capital and liquidity structures, and with weaker access to foreign funding are more sensitive to policy changes. Bank ownership types and loan currency denomination also create asymmetries in responses. Banks reflect these changes to firms with which they have longer established relationships or which have a healthier past credit performance to a lesser extent. A quasi-experimental analysis adds that the intense use of a collateral guarantee scheme has increased maturities at the time of tight monetary policy stance, reversing their long-run negative relationship. These results highlight the importance of the financial regulatory process on banks’ risk taking behavior, search-for yield appetites, identifying areas of potential systemic risk buildup, and finally policy design and coordination.

Trade Competition, Technology and Labour Reallocation, 2016 IZA Discussion Paper, No. 10034, July. [link]

joint with Rita Ginja (University of Bergen), Teodora Borota Milicevic (Uppsala University)

This paper provides new evidence on the reallocation of workers across firms and indus-tries with different technologies in response to increased import competition from developing countries. Using employer-employee matched data for the Swedish manufacturing sector, we find increased assortative matching of workers in information and communication technolo-gies (ICT) intensive industries, that is, high(low)-wage workers sort into high(low)-wage firms. However, the high and low end sorting happen in industries with different trade exposure: in ICT intensive industries exposed to high import competition from China there is an increase in the share of high-wage workers in high-wage firms, while in industries facing low Chinese import competition there is an increase in the share of low-wage workers in low-wage firms. Industries with low ICT intensity do not exhibit any of these sorting patterns even with varying trade exposure.

Globalization, Chinese Imports, and Wage Premia

This paper studies the effect of increased competition from low wage countries on the earnings gap between skilled and unskilled workers in a small open economy using detailed matched employer-employee data. Treating Chinese accession into the WTO as an exogenous shock to domestic competition, the paper shows that higher Chinese import penetration increases earnings for high-skilled workers translating into a significantly larger skill premium which contributes to the increase in wage inequality in manufacturing industries. A one percentage point increase in Chinese import penetration results in about 1 percent higher wages for skilled workers, and the rise in Chinese imports explains about 10 percent of the overall rise in skilled wages between 1996 and 2007. Wage responses within the job to rising imports from China are higher for skilled workers, which suggests that upwards wage adjustment happens to a larger degree on the job. The matched worker-firm micro data used covers the total population of workers in privately owned manufacturing firms between 1996 and 2007 in Sweden.

Cross-border Leveraged Buyouts

A substantial share (8.3%) of all cross-border Mergers and Acquisitions (M&As) undertaken during 1998-2008 consisted of cross-border buyouts performed by Private Equity (PE) firms, and this generated much heated discussion about role of PE in the international economy. To understand how this share varies across countries and time, I present a theory of cross-border M&As and buyouts, which shows that cross-border buyouts perform more restructuring of the target firm compared to incumbent buyers. The theory suggests that cross-border buyouts in relation to cross-border M&As are negatively related to (i) strong property rights, and (ii) strong transaction costs, and positively related to (iii) very high (or very low) international market integration. These predictions are tested on, and supported by a comprehensive data on all majority-owned cross-border M&As in the world.

Policy Publications

"A Glance at Commercial Loans in Terms of Value Added, Employment and Export Revenues" Joint with M.S.Çolak. In Financial Stability Report, Vol.32, Central Bank of the Republic of Turkey, May 2021.pp.46-49 [link_en] [link_tr]

"Measures and Regulations for the Markets." In Financial Stability Report, Vol.27, Central Bank of the Republic of Turkey, Nov 2018. pp.6-8 [link_en] [link_tr]

"Macroprudential Measures for Retail Loans." with Y.Kilic. In Financial Stability Report, Vol.27, Central Bank of the Republic of Turkey, Nov 2018. pp.33-35 [link_en] [link_tr]

"Sectoral Loan Distribution in Relation to Value Added and Productivity." with M.S. Colak In Financial Stability Report, Vol.27, Central Bank of the Republic of Turkey, Nov 2018. pp.41-45 [link_en] [link_tr]

Financial Stability Report, Vol.26. May 2018. Section IV.1 : Credit Developments and Credit Risk. Central Bank of the Republic of Turkey. pp.39-49 [link_en] [link_tr]

"Sectoral Concentration Risk in Bank Assets." Joint with M.S.Çolak and M.D.Özbekler. In Financial Stability Report, Vol.26, Central Bank of the Republic of Turkey, May 2018.pp.50-53 [link_en] [link_tr]

Financial Stability Report, Vol.25. Nov 2017. Section III.1 : Credit Developments and Credit Risk. Central Bank of the Republic of Turkey. pp.40-49 [link_en] [link_tr]

"Impact of Macroprudential Policies on Loan Utilization." CBRT Blog. Central Bank of the Republic of Turkey. September 2017 [link_en] [link_tr]

Financial Stability Report, Vol.24. May 2017. Section III.1 : Credit Developments and Credit Risk. Central Bank of the Republic of Turkey. pp.37-44 [link_en] [link_tr]

Financial Stability Report, Vol.23. Nov 2016. Section III.1 : Credit Developments and Credit Risk. Central Bank of the Republic of Turkey. pp.38-46 [link_en] [link_tr]

Financial Stability Report, Vol.22. May 2016. Section III.1 : Credit Developments and Credit Risk. Joint with E.Tok. Central Bank of the Republic of Turkey. pp.31-37 [link_en] [link_tr]

"Macroprudential Policies for Retail Loans." In Financial Stability Report, Vol.22, Central Bank of the Republic of Turkey, May 2016.pp.38-42 [link_en] [link_tr]

"Household Credit Standard Developments." In Financial Stability Report, Vol.21, Central Bank of the Republic of Turkey, Nov 2015.pp.38-40 [link_en] [link_tr]