Furqan Ali, Adil Saleem, Rana Muhammad Ammar Zahid, Judit Barczi, Judit Sagi
Banks play a pivotal role in channelizing the funds that help the economy to run smoothly. The lending behavior of banks is affected by economic, social, and political factors. This study aims to investigate banks' lending patterns during elections and business cycles in Turkey from 2001 to 2017. To investigate, banks are divided into public, private, and foreign banks based on ownership, as well as deposit and development banks based on their ability to receive deposits. Three local election events as well as five general election events are analyzed. One-step system Generalized Method of Moments (GMM) is employed on quarterly data of the period under study. The results show that during general elections all banks boost their loan growth rates except for international development banks. Furthermore, during municipal elections, public deposit and development bank loan growth rates rise more than private bank loan growth rates. Our model also suggests; public bank loan growth is less pro-cyclical than private bank growth. There is evidence that public deposit banks lend pro-cyclically, whereas public development banks do not.