Understanding how balance sheets interact with each other in an economy requires to define the role of money. Basically, modern money is a creature of double sided accounting. Endogeneity of the money means that it is not supply-constrained, but it is demand led. In this sense, “endogenous” means “having an internal cause or origin.” Notion of endogenous money is different than the monetarist approach. Quantity theory of money and monetarism claim that the money supply is exogenous and under the “direct” control of central banks. In fact, central banks use policy rates and other policy instruments and hope that economy will slowdown.
Turkish Banker’s Association describes how loan creates deposit.
This relationship is obvious despite the large off balance sheet balance. operations of Turkish Banks.
From the central bank perspective, as a lender of last resort in Turkish Lira, it is inevitable to supply reserves to banks as the major payment system operator. Turkish banks enjoy the cheap and unlimited liquidity to continue their operations.