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Asymmetric exchange rate pass-through and sectoral stock price indices: Evidence from Turkey

Author

Listed:
  • Muhammed Benli

    (Bilecik Seyh Edebali University)

  • Sedat Durmuskaya

    (Sakarya University)

  • Gokberk Bayramoglu

    (Sakarya University)

Abstract

In this study, we empirically investigate the impact of exchange rate changes on sectoral stock price indices in Turkey in a multivariate model controlling for consumer price index, industrial production index and money supply. For this purpose, we adopt nonlinear autoregressive distributed lags (NARDL) model developed by Shin et al. (2014). The empirical results indicate an incomplete pass-through effect of exchange rate to stock prices both in the long- and short-run. The results also support short-run asymmetry for all sectors considered in this study, except for ISE Information Services. Regarding the effect of CPI, IPI and M2, our findings indicate that, for majority of industries, consumer price index is significantly negatively correlated with stock prices in the long-run whereas the long-run impact of money supply and industrial production index on stock prices is positive.

Suggested Citation

  • Muhammed Benli & Sedat Durmuskaya & Gokberk Bayramoglu, 2019. "Asymmetric exchange rate pass-through and sectoral stock price indices: Evidence from Turkey," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 7(1), pages 25-47, May.
    • Handle: RePEc:sek:jijobm:v:7:y:2019:i:1:p:25-47
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    References listed on IDEAS

    as
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    5. Yau, Hwey-Yun & Nieh, Chien-Chung, 2009. "Testing for cointegration with threshold effect between stock prices and exchange rates in Japan and Taiwan," Japan and the World Economy, Elsevier, vol. 21(3), pages 292-300, August.
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    8. Mohsen Bahmani-Oskooee & Sujata Saha, 2018. "On the relation between exchange rates and stock prices: a non-linear ARDL approach and asymmetry analysis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(1), pages 112-137, January.
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    Cited by:

    1. Omer Ahmed Sayed Mohamed & Faiza Omer Mohammed Elmahgop, 2020. "Is the Effect of the Exchange Rate on Stock Prices Symmetric or Asymmetric? Evidence from Sudan," International Journal of Economics and Financial Issues, Econjournals, vol. 10(2), pages 209-215.

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    More about this item

    Keywords

    Nonlinear ARDL; Nonlinearity; Multivariate model; Cointegration; Stock market;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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