**2. Literature on credit expansion**

Credits can have positive and negative effects on the economy. For this purpose, studies conducted on credit expansion in Turkey were examined. Orhangazi explored the relation between capital inflows and credit expansion by using logit model. According to the findings, net private capital flows effect positively credit expansion by controlling other determinants [4]. Kara et al. made a cross-country comparison of credit growth by calculating a ratio of net credit use with respect to national income. They suggested a stable ratio of net credit relative to GDP that decreases slowly credit growth in the long-term period [5]. Kılıç examined relation between consumer credits and current account deficit. Time series methodology was adopted in order to find long-run dynamics. The study's results indicate one way Granger causality between consumer credits and current account deficit [6]. Karahan and Uslu analyzed relationship between credits extended by deposit banks to the private sector and current accounts deficit by using ARDL approach within time series framework. They found long-term relationship between variables [7]. Güneş and Yıldırım analyzed long-run relationship between credit expansion and current account deficit by using Johansen cointegration test. The results indicate existence of cointegration relation between vehicle and corporate loans and current account deficit [8]. Kılıç and Torun studied causality relation between consumer credits and inflation by using Granger causality test. The findings of the study gave evidence on two-way Granger causality relation between individual credit cards and inflation [9]. Köroğlu analyzed relation between credit expansion and current account deficit by using Granger causality test. He found one-way causality relation that credit expansion causes current account deficit [10]. Varlık investigated the effect of net and gross capital inflows and their components on credit boom by using logit model. The findings addressed that net and gross foreign direct investment inflows are negatively correlated with credit boom [11].

There is an extensive literature in Turkey examining the impact of credit expansion on macroeconomic factors. However, there is no study investigating the effect of credit expansion on liquidity risk by directly considering banks. The aim of this study is to fill this gap in the literature by using the panel data approach.
