The examination of the impact of global uncertainties on developed and developing markets with structural VAR model

Abstract

This study aims to examine the impact of global uncertainties on developed and developing markets with the help of the Structural VAR model. Due to the integration of financial markets, it is of great importance for securities market investors to be able to predict the direction of the markets. One of the variables to be used to predict the development of financial markets is the MSCI indices. In the study, the Developed Markets Index (MSCIWO) was used to represent developed markets, and the MSCIEF Emerging Markets Index was used to represent emerging markets. In the study, two separate models were established to measure the impact of global uncertainties on developed and developing markets. Using monthly data from 2014-2023, this study identifies differences between developed and emerging markets and shows how these markets react to different types of uncertainty. The results obtained from the study show that the effect of the Global Economic Policy Uncertainty Index (GEPU) variable on developed and developing capital markets is positive in the long term. Additionally, it was determined that the Geopolitical Risk Index (GPR) variable has a long-term negative impact on both markets. Analysis results indicate that the effect of the VIX variable on advanced markets is not significant, whereas it shows a negative impact on developing markets.