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Turkey: From a thriving economic past towards a rugged future? - An empirical analysis on the Turkish financial markets

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  • Stoupos, Nikolaos
  • Nikas, Christos
  • Kiohos, Apostolos

Abstract

Turkey had been economically thriving after the end of the economic crisis of 2001. Nonetheless, the recent depreciation of the Turkish lira proved the eventual fragility of the Turkish economy. This research attempts to examine whether the financial markets behavior had forecast this economic collapse. The results support that negative dynamics take place between the nominal exchange rate of Turkish lira and the Turkish stock market index in the long-run. Simultaneously, it is estimated that the uncovered equity parity had been in effect during the last decade but its impact highly deteriorated after March 2018. The Turkish policy makers will sooner or later have to either abandon the low interest rate policy or apply for financial assistance from the IMF.

Suggested Citation

  • Stoupos, Nikolaos & Nikas, Christos & Kiohos, Apostolos, 2023. "Turkey: From a thriving economic past towards a rugged future? - An empirical analysis on the Turkish financial markets," Emerging Markets Review, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:ememar:v:54:y:2023:i:c:s1566014122001091
    DOI: 10.1016/j.ememar.2022.100992
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    More about this item

    Keywords

    Turkish economy; Uncovered equity parity; Turkish financial markets; Factor-augmented error correction model; FIEGARCH; Forex risk;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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