Abstract
In this study, we try to examine whether the forecast errors obtained by the ANN models affect the breakout of financial crises. Additionally, we try to investigate how much the asymmetric information and forecast errors are reflected on the output values. In our study, we used the exchange rate of USD/TRY (USD), the Borsa Istanbul 100 Index (BIST), and gold price (GP) as our output variables of our Artificial Neural Network (ANN) models. We observe that the predicted ANN model has a strong explanation capability for the 2001 and 2008 crises. Our calculations of some symmetry measures such as mean absolute percentage error (MAPE), symmetric mean absolute percentage error (sMAPE), and Shannon entropy (SE), clearly demonstrate the degree of asymmetric information and the deterioration of the financial system prior to, during, and after the financial crisis. We found that the asymmetric information prior to crisis is larger as compared to other periods. This situation can be interpreted as early warning signals before the potential crises. This evidence seems to favor an asymmetric information view of financial crises.
Highlights
Since the beginning of the 1980s many countries all over the world have experienced financial crises with different degrees of severity
It is noteworthy that the global financial system was exposed to different financial crises and financial distress repeatedly due to the fact that markets and policymakers again forgot the lessons of the past
Our main objective in the second Artificial Neural Network (ANN) is to obtain the variables of USD, Borsa Istanbul Index (BIST), and gold price (GP), as they are the most important variables that are affective on the Turkish economy
Summary
Since the beginning of the 1980s many countries all over the world have experienced financial crises with different degrees of severity. Savings and loans crises in the 1980s, the 1987 stock market crash, the Tequila crisis in 1994, the Asian crisis of 1997–1998, and the global financial crisis of 2008 all hit the entire world’s economies and financial markets. The recent financial crisis was agreed to be the worst financial crisis since the Great Depression, which resulted in the collapse of many large financial institutions. Many of these crises could be avoided, the world had to cope with these crises, which caused high inflation, rising leverage, large current account deficits, slowing global economy, and high unemployment rates, especially among the young people. Each time a financial crisis occurs, the financial system, which plays a critical role in the economy by channeling funds from those with surplus funds to those in need of funds, is adversely affected
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