Research


Working Papers

"Zombie Firms in Network: Congestion and Evergreening" (joint with E.Aktuğ and H.Torun) (submitted)

Abstract: We explore the spillover impact of zombie firms in Türkiye by exploiting a rich administrative dataset that contains firm-level information on balance sheets, inter-firm sales, employment, and firm-bank level credit records. We document three key facts regarding zombie dynamics: (i) Leveraging matched firm-bank level credit registry data, we highlight the presence of an evergreening motive, leading to a misallocation of credit away from productive firms. (ii) Zombie firms, which are on average less productive than the nonzombie firms, impede investment and employment opportunities at healthier firms. Nonzombie firms operating in sectors with a high prevalence of zombie firms experience lower sales, assets, and productivity. (iii) Incorporating B2B sales data structured similarly to firm-level input-output data, our study reveals that firms with stronger upstream or downstream zombie connections tend to exhibit reduced sales, investment, and employment compared to firms without any zombie connections. Moreover, banks supply less credit to healthy firms operating in a zombie network than to firms with fewer zombie connections. 


"Demand and Supply-Driven Inlation in Türkiye" (joint with E.Aktuğ) (submitted)

Abstract: We document the demand and supply driven components of inflation in Turkey following the decomposition of Shapiro (2022). The results suggest that recent hike in inflation starts with supply-driven inflation, but over time it transitioned into an inflationary environment driven by demand. With the recent hawkish stand of CBRT, the demand driven inflation is starting to go down, but there is still significant room for monetary policy intervention. Consistent with the theory, oil-supply and exchange rate shocks act to increase supply-driven contribution, whereas monetary policy tightening acts to reduced demand-driven contribution of inflation. This decomposition can be potentially a useful real-time tracker for policymakers. 


"Heterogeneity and Non-linearity in the Relationship between Rediscount Credits and Firm Exports" (joint with A.Aldan and H.Torun) (submitted)

Abstract: Export credits are used extensively throughout the world to temper the negative effects of financial constraints on exports. In this paper, we focus on a particular form of subsidized export credits, namely export rediscount credit scheme implemented by the Central Bank of the Republic of Türkiye. For this purpose, we create a detailed firm level data set matching monthly firm level export data with credit and financial statement data. Our results show that exports of firms that use rediscount credit increase significantly in half a year horizon and there is a positive relation between the amount of credit and export growth. Moreover, the relation between the credit amount and export volume is not linear; the correlation starts to decline after a certain point. Our results also reveal heterogeneity with respect to size; exports of small firms increase more after using rediscount credits.


"Unveiling Türkiye's Productivity Puzzle: A Study on Total Factor Productivity Estimation"  (submitted)

Abstract: This paper examines the increasing use of proxy variables to control for unobserved factors in the estimation of production functions, contributing to the empirical literature in three significant ways. First, it offers a structured review of various estimators and their underlying assumptions. Second, it compares the results obtained using different estimators on a comprehensive dataset of Turkish firms, ensuring comparability with definitions and data used in most empirical studies. In evaluating the performance of these estimators, the study employs various proxy variables, considers alternative moment conditions, and allows for different timing assumptions of inputs. The findings reveal a widening gap between frontier and laggard firms, though there is a trend of laggard firms catching up. Additionally, the results indicate that frontier firms have a positive spillover effect on the overall economy.


"Cost Elasticity of Firm Credits: Heterogeneity Across Firm Types" (joint with E.Aktuğ and H.Torun)

Abstract: This study examines credit demand at the firm level, employing empirical analysis to uncover the determinants and implications of firms seeking external financing in Türkiye. Drawing on a comprehensive dataset of firms across diverse sectors, we investigate the factors influencing credit demand, including firm size, industry type, financial health, and economic conditions. Our findings reveal that credit demand is a multifaceted phenomenon, influenced by a complex interplay of internal and external factors. We find elasticity of credit demand becomes more flatter as the firm’s employment increases.


"Endogenous Pricing to Market: How Exporters' Productivity Shapes Their Response to Exchange Rate Depreciation " (joint with M.E.Çıraklı)

Abstract:In this study, we analyze the response of exporters to fluctuations in exchange rates. We present a model that illustrates how firms, characterized by different productivity levels, react uniquely to currency depreciation, primarily due to distribution costs inherent in the export market. High-productivity firms typically opt to raise their markups rather than expanding their export volume, whereas low-productivity firms tend to pursue the opposite approach. This observation underscores the endogenous and heterogeneous nature of pricing strategies in the market. Importantly, the variability in these responses plays a pivotal role in shaping the overall impact of exchange rate movements. 


"Unintended Consequence of Export Revenue Regulation on Export Reporting Regulations on Export Revenues and Export Underreporting", (joint with A. Aldan, H.İ.Aydın, M.E.Çıraklı, and H.Torun)

Abstract: Recent trends in trade data reporting have unveiled intriguing disparities between export declarations by Turkey and corresponding import values reported by its trading partners. This study investigates the underlying factors contributing to this discrepancy, with a particular focus on the adjustment of the "Sale of Export Proceeds to the Central Bank" provision. Utilizing three distinct methodologies, including UN Comtrade data analysis and Benford Analysis of monthly firm customs data, the study uncovers nuanced insights. Notably, it reveals a decrease in Turkey's declared exports relative to partner countries' import ratios post-April 2022, a phenomenon absent in inter-country trade. Furthermore, it identifies a surge in erroneous data entries post-April 2022, particularly prominent in SMEs and sectors with high informal employment rates. 


"Credit Allocation: An Indexed Approach"(joint with A.Aldan and H.Torun)

Abstract: We explore the credit allocation in Türkiye using administrative firm-level data by creating novel indices. The export, employment, and productivity indices offer a data-driven and comprehensible means to monitor the trajectory of credit distribution. Recent trends indicate a growing inclination towards directing loans to firms that excel in exports, productivity, and robust employment in Türkiye. These indicators play a crucial role in understanding the macro- level development of credit growth and composition, providing a significant input for evaluating credit effectiveness.