Faculty Scholarship 1994 - Present

The 1994 Economic Crisis and Its Effects on Commercial Banks: An Empirical Investigation

This paper analyzes the causes and consequences of the 1994 economic crisis. Utilizing Malmquist index, it also examines productivity change in Turkish banks between 1992 and 1996 to explore its effects on banking performance. The pre and post crisis results demonstrate that bank productivity followed a V-shape patter: hitting a dramatic level in 1994 (-17%) and bouncing back after 1994 (+15%). The major source of productivity fall was a downward shift in production frontier (technical regress) rather than increasing distance of banks from the frontier (efficiency decrease). The further analysis by ownership indicates that foreign banks suffered the most from the crisis while state banks suffered the least.