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The Relationship Between Financial Deepening and Business Cycles Volatility: Turkey Case

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  • Muhammed Hasan YÃœCEL

Abstract

The effect of financial deepening on macroeconomic indicators is a subject that has taken a large place in the literature. This relationship is also important for those who run the economy. In this study, the relationship between financial deepening and the volatility of business cycles is analyzed with annual frequency data covering the years 1960-2019. In the study using VAR analysis, financial deepening is calculated also the share of the broad money supply in nominal GDP. The volatility of business cycles is included in the analysis by calculating as the moving average of the standard errors of the real GDP data. As a result of the VAR analysis, it has been determined that there is a transfer from financial deepening to the volatility of business cycles. In the study, in which Granger Causality analysis was carried out, it was determined that financial deepening is the cause of business cycle volatility, but business cycle volatility is not the cause of financial deepening. Besides, according to the results of the Johansen Cointegration test, it was found that the two variables are co-integrated in the long term, that is, they act together.

Suggested Citation

  • Muhammed Hasan YÃœCEL, 2021. "The Relationship Between Financial Deepening and Business Cycles Volatility: Turkey Case," Fiscaoeconomia, Tubitak Ulakbim JournalPark (Dergipark), issue 2.
    • Handle: RePEc:fis:journl:210212
    DOI: 10.25295/fsecon.875648
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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