Testing of Macroeconomic Factors Affecting Capital Markets with Granger Causality Method: Turkey Practice

Abstract

Purpose-In this study, the relationship between the capital market (BIST 100 index) and macroeconomic variables that are thought to affect thecapital market (gold prices, oil prices, Euro-US Dollar exchange rate basket, budget balance, foreign trade balance) will be examined with the Granger causality method.Design/methodology/approach-The study covers the period of 2010-2019 on a monthly system. The data were obtained from the CBRT (EDDS) and TurkStat. Statistical package software (Stata and EViews 9) were used in the analysis of the data. BIST 100 index return is included in the model as a dependent variable and macroeconomic factors as an independent variable. The relationship between dependent and independent variables was examined with the VAR-based Granger causality method.Findings-As a result of the study, it has been understood that only the gold price among the macroeconomic factors is the Granger cause of the BIST 100 index. In other words, lagged changes in gold prices explain the variance of the BIST 100 index. When the direction of the relationship was examined, a one-way Granger causality was observed from the Ons variable to theBIST 100 variable. When the action-reaction shocks between the BIST 100 variable and the ONS variable are examined, a shock in gold prices affected the return of the BIST 100 index for about 2 months, and this effect decreased and disappeared from the 5thmonth. Again, approximately 6.82% of the variance of the BIST100 variable is explained by the Ons variable.Discussion-Developments in the capital markets are followed closely by both institutional investors and individual investors. For this reason, it is extremely important what factors affect the BIST 100 index, which is thought to represent the Turkish capital market. According to the findings of the study, changes in gold prices affect the BIST 100 index return, and the relationship between these twovariables should be closely monitored. Addressing the long-term relationship between the BIST 100 index and gold prices in future studies will make an important contribution to the literature