Abstract
Gold and oil price volatilities are thought to have an impact on financial markets. The main aim of this study is to examine the effects of changes in gold and oil prices on Turkish financial markets. For this purpose, the effects of gold and oil price volatilities on nominal US dollar/Turkish lira exchange rate, Borsa Istanbul 100 Index and Turkey 10-year bond interest rates are used to represent Turkish financial markets are analysed by Granger Casuality Test. The study comprises daily data over the period of June 1, 2010 - April 30, 2017. According to the results of the analysis, there is no causality relationship from gold and oil prices to Turkish financial markets. On the other hand, it is concluded that there is a one-way causality relationship from BIST100 index to Turkey 10-year bond interest rate and two-way causality relationship between BIST 100 index and nominal US dollar/Turkish lira exchange rate.
Highlights
Oil is used as a vital input for many sectors while maintaining the economic activities
The purpose of this study is to analyze the effects of changes in gold and oil prices on Turkish financial markets, which is consisting of the Istanbul Stock Exchange 100 index, the nominal US dollar/Turkish lira exchange rate and interest rates on Turkey 10-year treasury bonds
Oil prices can have an inflationary effect due to the fact that the increase in oil prices increases the prices of gasoline and the prices of gasoline are directly reflected in the inflation through transportation
Summary
Oil is used as a vital input for many sectors while maintaining the economic activities. Inflationist price pressure creates a domino effect, spill over to other sectors and causes an increase in inflation rates in the national economy (Harun et al, 2018). The Arab-Israeli wars in the Middle East between 1948-1973 put pressure on oil prices so that in 1973, the oil crisis started to be experienced with the Arab countries declaring that they would not export oil to the countries next to Israel. The fact that the oil crisis experienced in 1973 was highly influential on real economic activities caused the oil price fluctuations to be monitored more closely. Fluctuations in oil prices create risks and uncertainties in the economy and negatively affect the expectations of economic agents (Kilian, 2014; Kilianand Lee, 2014). The financial crisis experienced after the exchange rates were allowed to fluctuate revealed the importance of gold and caused them to be called “safe harbour” in uncertainty environments
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