MACROECONOMIC EFFECTS OF GLOBAL UNCERTAINTY IN THE TURKISH ECONOMY

Abstract

Purpose- In this study, it is aimed to investigate the effects of global uncertainty shocks on the macroeconomic variables of the Turkish economy. Methodology- In the study, the global world uncertainty index (WUI) constructed by Ahir et al. (2022) is used as an indicator of global uncertainty. A structural auto regressive (SVAR) model is established, which includes five variables (global uncertainty indicator, economic growth rate, inflation rate, unemployment rate, and interest rate). In addition, three real variables representing economic activity (real consumption, real investment and real bank loans) are substituted for unemployment rate in the model, respectively. The data set covers the period 2003Q1-2020Q1. Findings- According to the findings of impulse response and variance decomposition analyses, real GDP growth, real consumption growth, real investment growth and real credit growth react negatively and significantly to an increase in global uncertainty. On the other hand, inflation rate, unemployment rate and interest rate respond positively and significantly to an increase in global uncertainty. These results prove that a global uncertainty shock creates the similar effects of a negative supply shock on the Turkish economy. In addition, the robustness of the findings is checked using the global economic policy uncertainty (GEPU) index developed by Baker et al. (2016). Conclusion- In the light of these findings, it can be suggested that the negative effects of global uncertainty shocks on domestic macroeconomic indicators should be mitigated through monetary and fiscal policies. Keywords: Global uncertainty, structural VAR, economic growth, inflation, unemployment JEL Codes: C32, E30, F40