ZELİHA SAYAR

According to the Neo-classic theory S(i,y) Saving relationship with a history of the country, institutions, the habit of savings, culture, the structure of the financial system ( market-based or banking- based ). If interest rate does not determine in the markets, how can it affect the savings?

In the Ottoman empire the dominance of foreıgn banks and minorities At the end of 19th century the establishment of Ziraatbank and local commercial bank After Republic of Turkey national banks By 1930s state banks After the second world war private banks Until 1980s interest rates determined by the central bank.

In 1927, the interest rate of deposits was 5,25, and the interest rate on deposits was 7,75, in ,75 and 6,35. It shows that the interest rate of deposits reduced after the establishment of the central bank. Total Deposits/ GDP , , , , ,2

After 1950 savings rates rose despite negative real interest rate. It was an inverse relationship between interest rates and savings. Because the theory of price (price is interest rate for this model) did not work and quantity (quantity or income is defined deposits for banks) was determined in the banking system.. In the history of Turkish economy because of supporting cheap credit to the private and public sector, interest rates were kept low many years and the banking system negatively impacted it. Despite negative real interest rates, the total amount of deposits in national banks increased.

To achieve this result, rather than other financial institutions, e.g. bonds, stock. Banks had campaıgns, and notably branch banking was implemented. In conclusion, the branching reduced the negative effect of low interest and savings increased. It was this branching policy, not high-interest rates, that developed saving habit within the Republic of Turkey.