This chapter investigates the factors behind the maladroit expansion of lending in the Turkish economy. Unwarranted loan growth is seen as the product of banking sector policies which came to be excessively reliant on cross-currency swaps. The effect of this is the dollarization of the Turkish banking system and a move away from deposit taking. The nature of cross-country swaps is discussed at length, highlighting the mechanisms and the role of this type of financial instrument in shaping the contemporary Turkish economy. These trends are especially pertinent given the context of indebtedness in the Turkish economy and its manifestation in levels of household and firm debt.
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