| Summary: | The banking sector is the largest part of the financial system in terms of both its function
and size in a country's economy. The contraction or expansion that may occur in the sector due to this
function it fulfills is important in terms of financial stability. The fact that sector-based vulnerabilities
spread to the majority of the financial system and cause negative effects on the real sector makes it
essential to make efforts to anticipate and prevent vulnerabilities.
In this study, it is aimed to reveal the macroeconomic factors affecting the financial fragility
of the Turkish banking sector. The Turkish banking sector “non-performing loans/total loans” ratio is taken as the indicator of financial fragility. Macroeconomic variables thought to be related to
financial fragility; credit risk ratio, consumer price index, unemployment rate, BIST 100 Index and
manufacturing industry production index. The study consists of monthly data between 10/2008 and
08/2022. Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) unit root tests and Zivot-Andrews
unit root tests with structural break have used to determine the stationarity levels of the variables.
Whether or not there is causality between the variables, and if there is a causal relationship, the
directions were analyzed using the "Toda-Yamamoto" method. According to the results of the TodaYamamoto causality test, a causal relationship was found from the manufacturing industry production
index and BIST 100 index variables to the financial fragility variable at the 5% significance level.
However, no causality relationship was found from country risk premium, unemployment rate and
consumer price index variables to financial fragility variable. As a result of this analysis, it has been
concluded that there is a relationship between financial fragility, manufacturing industry production
index and BIST 100 index, that is, changes in these two indices affect financial fragility.
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