Financial Intermediation and Industrial Growth: The Role of Credit, Liquidity, and Interest Rates on Loans in Türkiye

This study examines the relationship between banking-sector conditions and real-sector performance in Türkiye over the period 2010Q1–2024Q1. Two complementary indicators of industrial activity are considered: the Manufacturing Industry Capacity Utilization Rate (KKO) and the Industrial Production Index (SUE). Two ARDL specifications are estimated, with lag structures selected using the Schwarz Information Criterion (SIC). In the second model, the Industrial Production Index is used in level form rather than as a change rate in order to examine its long-run relationship with banking-sector indicators. The empirical results indicate a positive association between the credit-to-GDP ratio and both measures of industrial activity. Banking-sector liquidity is also positively associated with capacity utilization and industrial production. The weighted average lending rate exhibits different associations across the two indicators: it is positively associated with capacity utilization and negatively associated with the level of industrial production. The intervention variables capture major macroeconomic episodes and exhibit heterogeneous associations across the two specifications. Overall, the findings highlight the importance of considering both realized production and capacity utilization when examining the relationship between financial intermediation and industrial activity in Türkiye. Given the different integration properties of the dependent variables, the results for capacity utilization are interpreted as conditional dynamic associations, whereas the Industrial Production Index specification is evaluated within the ARDL bounds-testing framework for a long-run level relationship.