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The Interaction Between Economic Uncertainties and Financial Cycles in Türkiye: Frequency Domain Symmetric and Asymmetric Causality Analysis

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  • Ayşegül Şahin

Abstract

This study analyzes the impact of the Turkish Economic Uncertainty Index on financial cycles with monthly data for the period 2010:01–2024:12. Financial cycles are represented by a composite index formed by indicators such as banking spread, real housing prices, and the BIST100 index. In order to examine the relationship at the short-, medium-, and long-term levels, Breitung and Candelon (2006) applied a frequency domain symmetric and asymmetric causality test. The findings show that decreases in economic uncertainty significantly affect the positive component of financial cycles in both the short and long term. On the other hand, it was found that the economic uncertainty index tended to decrease in the short term during financial contraction periods. The results indicate that reducing uncertainties not only provides market confidence but also supports persistent financial expansion processes. The study makes an original contribution to the literature by revealing for the first time the impact of policy uncertainty on financial cycles on a frequency-based basis through the asymmetric effect channel.

Suggested Citation

  • Ayşegül Şahin, 2025. "The Interaction Between Economic Uncertainties and Financial Cycles in Türkiye: Frequency Domain Symmetric and Asymmetric Causality Analysis," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 10(2), pages 484-501.
    • Handle: RePEc:ahs:journl:v:10:y:2025:i:2:p:484-501
    DOI: 10.30784/epfad.1666589
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    References listed on IDEAS

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    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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