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Causality Relationship Between Economic, Financial, Political Risk and Growth: The Case of Turkey

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  • Esra Soyu Yıldırım

    (Aksaray Üniversitesi, Sosyal Bilimler Meslek Yüksek Okulu, Aksaray, Türkiye)

  • Cuma Demirtaş

    (Aksaray Üniversitesi, İktisadi ve İdari Bilimler Fakültesi İktisat Bölümü, Aksaray , Türkiye)

  • Munise Ilıkkan Özgür

    (Aksaray Üniversitesi, İktisadi ve İdari Bilimler Fakültesi İktisat Bölümü, Aksaray , Türkiye)

Abstract

This study aims to examine the causality relationship between Turkey’s economic, financial and political risk ratios and growth. Toda-Yamamoto causality, Bootstrap Toda-Yamamoto causality, and time-varying symmetric and asymmetric causality tests were used to examine the relationship between the risk ratios and growth between 2000- 2020. The findings show that (i) The Toda-Yamamoto causality test shows a causal relationship between financial risk and growth, economic risk and financial risk, and economic risk and political risk. (ii) The Bootstrap Toda-Yamamoto causality test revealed a causal relationship between financial risk and growth. The Bootstrap Toda-Yamamoto, asymmetric causality test, showed that a positive shock in financial risk causes a positive shock in growth, a negative shock in financial risk causes a negative shock in growth, and a negative shock in political risk causes a positive shock in growth. (iii) The time-varying relationship symmetric causality tests allowed for detecting causality between economic risk and growth, financial risk and growth, and political risk and growth. The time-varying relationship asymmetric causality tests revealed that a negative shock in economic risk caused a positive shock in growth; a positive shock in economic risk caused a negative shock in growth; a negative shock in financial risk caused a positive shock in growth and demonstrated the effects of the positive shock in financial risk as a negative shock in growth. However, a negative shock in growth was only observed when there was a positive shock in political risk.

Suggested Citation

  • Esra Soyu Yıldırım & Cuma Demirtaş & Munise Ilıkkan Özgür, 2022. "Causality Relationship Between Economic, Financial, Political Risk and Growth: The Case of Turkey," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 9(1), pages 165-186, January.
    • Handle: RePEc:ist:iujepr:v:9:y:2022:i:1:p:165-186
    DOI: 10.26650/JEPR1016857
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    More about this item

    Keywords

    Economic risk; Financial risk; Political risk; Economic growth; Causality analysis JEL Classification : F34 ; E43 ; G32;
    All these keywords.

    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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