The Impact of US-China Tensions on Borsa Istanbul Sector Indices: The Fourier Toda–Yamamoto Causality Approach

The purpose of this study is to determine the impact of US-China trade tensions on sector indices in Turkey's stock markets as a developing economy. In the study's data set, the dependent variables selected to represent the Turkish stock markets and sector indices are the BIST100, Services, Financial, Industrial, and Technology indices. The independent variable is the US-China Tension Index (UCT) created by Rogers et al. (2024) to represent US-China tensions. The study covers the period from June 2000 to February 2024. In the analysis, the impact of the US-China Tension Index (UCT) on the BIST100 and sector indices was measured using the Fourier Toda-Yamamoto (2016) Causality Test, which takes structural breaks into account. To increase the reliability of the causality test results, the stationarity levels of the variables were measured using traditional unit root tests as well as new generation unit root tests, which are more powerful. The analysis used the traditional ADF unit root test, the FADF unit root test that takes structural breaks into account, and the Fourier-Sollis (2018) unit root test that considers both structural breaks and linear non-stationarity. The analysis results show that the UCT index has an impact on both the BIST100 and the Services, Financial, Industrial, and Technology indices. This result can be seen as a sign of how sensitive the Turkish stock market is to global geopolitical tensions.