Abstract:

We examine the dependence and causal linkages among selected macroeconomic variables, namely BIST100, bond yields, CDS, currency basket, and gold prices, in Turkey. Using daily data covering the period 2011-01-14 to 2019-04-30, we find the following empirical results. First, all variables are found to be integrated into the first order, namely stationary in first log-difference. Second, our paper detects evidence of significant interdependence in thirteen out of twenty pairs of variables. Third, the findings of the VECM test reveal unidirectional and bidirectional causalities in the short- and long-run. Fourth, the results of wavelet coherence analysis highlight a negative relationship for the pairs of BIST100-currency basket and BIST100-gold prices while positive linkages are observed for the pairs of bond rates-currency basket, bond rates-gold prices, and CDS-gold prices. In addition, the BIST100 index unidirectionally leads currency basket between 16- and 128-day holding periods between 2013-2017 years. Lastly, there exist unidirectional causal linkages among changes in prices for all the pairs of variables, except for BIST100-CDS with noncausality and gold-currency basket with two-way causality. Our findings yield significant implications for portfolio and risk management and financial stability.

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