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Frequency Domain Causality Analysis of Interactions between Financial Markets of Turkey

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  • Mustafa Ozer
  • Melik Kamisli

Abstract

In this paper, we examined the dynamic linkages between financial markets of Turkey by using frequency domain causality analysis, proposed by Breitung and Candelon (2006), for the weekly Turkish data from 2003 to 2015. The results show that there are volatility spillovers from stock market returns to interest rate and EURO both in the mid and long terms, and short and medium-terms to U.S. Dollar; but, from U.S. Dollar to stock market returns in the short-term. In the long-run, EURO exchange rate Granger cause to interest rate; but, interest rate Granger cause to EURO exchange rate in the short-run. On the other hand, there is no evidence of volatility spillovers from EURO and interest rate to stock market returns. Based on these results, we can conclude that there are certain degree of interdependence and volatility spillovers among the financial markets of Turkey, which have serious policy implications.

Suggested Citation

  • Mustafa Ozer & Melik Kamisli, 2016. "Frequency Domain Causality Analysis of Interactions between Financial Markets of Turkey," International Business Research, Canadian Center of Science and Education, vol. 9(1), pages 176-186, January.
    • Handle: RePEc:ibn:ibrjnl:v:9:y:2016:i:1:p:176-186
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    References listed on IDEAS

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    2. Nieh, Chien-Chung & Lee, Cheng-Few, 2001. "Dynamic relationship between stock prices and exchange rates for G-7 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 41(4), pages 477-490.
    3. Alok Kumar Mishra, 2004. "Stock Market and Foreign Exchange Market in India: Are they Related?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 5(2), pages 209-232, September.
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    Cited by:

    1. D. O. Olayungbo, 2019. "Effects of Global Oil Price on Exchange Rate, Trade Balance, and Reserves in Nigeria: A Frequency Domain Causality Approach," JRFM, MDPI, vol. 12(1), pages 1-14, March.
    2. Oguzhan Cepni & Yavuz Selim Hacihasanoglu & Muhammed Hasan Yilmaz, 2020. "Credit decomposition and economic activity in Turkey: A wavelet-based approach," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 20(3), pages 109-131.
    3. Joel Oyeleke*, Olusola, 2021. "Frequency Domain Approach To Causality Among Fiscal Deficit, Interest Rates And Inflation In Nigeria," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 8(1), pages 46-59, June.

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    More about this item

    Keywords

    frequency domain causality; traditional Granger causality; volatility spillovers;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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