Interest rates, the yield curve and bank profitability in an emerging market economy

Resul Aydemir*, Gokhan Ovenc

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

31 Citations (Scopus)

Abstract

We investigate how the level of the short-term interest rate and the slope of the yield curve affect bank profitability in an emerging market economy using a dynamic panel model for the period 2002–2014. The estimation results suggest that while the short-term interest rate and the slope of the yield curve have a negative and significant impact on profits in the short run, the effects of these variables turn out to be positive in the long run, as expected. Hence, our findings indicate that monetary policy significantly influences bank profits in Turkey. The results also emphasize that bank profits in an emerging market exhibit much more sensitivity to interest rates than bank profits in an advanced economy such as the UK.

Original languageEnglish
Pages (from-to)670-682
Number of pages13
JournalEconomic Systems
Volume40
Issue number4
DOIs
Publication statusPublished - 1 Dec 2016

Bibliographical note

Publisher Copyright:
© 2016 Elsevier B.V.

Keywords

  • Bank profitability
  • Emerging market
  • Interest rates
  • Net interest margin
  • Yield curve

Fingerprint

Dive into the research topics of 'Interest rates, the yield curve and bank profitability in an emerging market economy'. Together they form a unique fingerprint.

Cite this