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The Causal Effects of Economic Policy Uncertainty on Changes in Exchange Rates and Volatility: Empirical Evidence from Türkiye

Year 2024, Volume: 26 Issue: 1, 153 - 163, 04.04.2024
https://doi.org/10.32709/akusosbil.1103206

Abstract

Applying a novel econometric method, nonparametric causality-in-quantiles approach, this paper investigates the causal effects of economic policy uncertainty (EPU) on Turkish changes in exchange rates and volatility with the monthly data spanning from February 1998 to December 2019. This approach of gives an opportunity to investigate the (non)causality in the θ-th quantile only in mean (first moment,i.e., m=1) or variance (second moment,i.e.,m=2) as well as the (non)causality in the mean and variance (m=1 and 2) successively. In sum, this approach calculates volatility by squaring returns. We use EPU indexes of the United States, Australia, European Union, Japan, Canada, and the United Kingdom and their currencies (USD, AUD, EUR, JPY, CAD, GBP, respectively) vis-à-vis Turkish Lira (TRY) and find that the EPUs of Australia, the European Union and Japan affect the returns of the AUD/TRY, EUR/TRY and JPY/TRY exchange rates, respectively. These results show that the EPU indices of these countries can give an idea about the returns and volatility of the relevant Turkish changes in exchange rates. The findings of this paper provide important implications for policymakers, investors, firms, exporters, and importers. Also, some studies can be carried out on the effects of the EPU index that will be created to Türkiye on the Turkish exchange rates or the other Turkish financial assets.

References

  • Aksoy, A. & Tanrioven, C. (2007). Sermaye Piyasası Yatırım Araçları ve Analizi. Ankara: Gazi Kitabevi.
  • Apergis, N., Bonato, M., Gupta, R. & Kyei, C. (2018). Does Geopolitical Risks Predict Stock Returns and Volatility of Leading Defense Companies? Evidence from a Nonparametric Approach. Defence and Peace Economics, 29(6), 684-696.
  • Arbatli, E. C., Davis, S. J., Ito, A. & Miake, N. (2019). Policy Uncertainty in Japan. NBER Working Paper, No, 23411.
  • Arrow, K. J. (1968). Optimal Capital Policy and Irreversible Investment. in J. N. Wolfe (ed.), Value, Capital, and Growth, University of Chicago Press, 1-20.
  • Aslan, Ç. & Akpiliç, F. (2022). Döviz Kuru Belirsizliklerinin Türkiye’nin Teknoloji İçeriğine Göre Sınıflandırılan Ürünlerin İhracat Akımlarına Etkileri: Panel Ardl Analizi. Anadolu Akademi Sosyal Bilimler Dergisi, 4 (1) , 90-108.
  • Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring Economic Policy Uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636.
  • Bal, H., Akca, E. E., & Demiral, M. (2017). The Influences of Exchange Rate Changes on Turkey’s Trade with the European Union. Kahramanmaraş Sütçü İmam University Faculty of Economics and Administrative Sciences Journal, 7(2), 61-82.
  • Balcilar, M., Gupta, R., Kyei, C., & Wohar, M. E. (2016). Does Economic Policy Uncertainty Predict Exchange Rate Returns and Volatility? Evidence from a Nonparametric Causality-in-Quantiles Test. Open Economies Review, 27(2), 229-250.
  • Balcilar, M., Gupta, R., Nguyen, D. K., & Wohar, M. E. (2018). Causal Effects of the United States and Japan on Pacific-Rim Stock Markets: Nonparametric Quantile Causality Approach. Applied Economics, 50(53), 5712-5727.
  • Bartsch, Z. (2018). Economic Policy Uncertainty and Dollar-Pound Exchange Rate Return Volatility. Journal of International Money and Finance, 98, 1-17.
  • Beckmann, J., & Czudaj, R. (2017). Exchange Rate Expectations and Economic Policy Uncertainty. European Journal of Political Economy, 47, 148-162.
  • Bernanke, B. S. (1983). Irreversibility, Uncertainty, and Cyclical Investment. Quarterly Journal of Economics, 98(1), 85-106.
  • Bhatia, V., Das, D., Tiwari, A. K., & Shahbaz, M. (2018). Do Precious Metal Spot Prices Influence Each Other? Evidence from a Nonparametric Causality-in-Quantiles Approach. Resources Policy, 55, 244-252.
  • Boyacioglu, M. A., & Curuk, D. (2016). Effect of Foreign Exchange Rate Changes to the Stock Returns: An Application on the Istanbul Stock Exchange 100 Index. The Journal of Accounting and Finance, 70, 143-156.
  • Brock, W., Dechert, D., Scheinkman, J., & LeBaron, B. (1996). A Test for Independence Based on the Correlation Dimension. Econometric Reviews, 15(3), 197-235.
  • Dai, Y., Zhang, J., Yu, X., & Li, X. (2017). Causality Between Economic Policy Uncertainty and Exchange Rate in China with Considering Quantile Differences. Theoretical and Applied Economics, 24(3), 29-38.
  • Das, D., Kumar, S. B., Tiwari, A. K., Shahbaz, M., & Hasim, H. M. (2018). On the Relationship of Gold, Crude Oil, Stocks with Financial Stress: A Causality-in-Quantiles Approach. Finance Research Letters, 27, 169-174.
  • Daştan, M. & Karabulut, K. (2022). Küresel Ekonomik Politika Belirsizliklerinin Makroekonomik Aktivite Üzerindeki Etkileri: Türkiye Örneği. Ataturk University Journal of Economics & Administrative Sciences, 36 (1), 133-142.
  • Davis, S. J., Liu, D., & Sheng, X. S. (2019). Economic Policy Uncertainty in China since 1949: The View from Mainland Newspapers. Working Paper, Mimeo.
  • Demir, E., & Ersan, O. (2018). The Impact of Economic Policy Uncertainty on Stock Returns of Turkish Tourism Companies. Current Issues in Tourism, 21(8), 847-855.
  • Dumrul, C. & Gokalp, K. H. (2022). Döviz Kuru Oynaklığının İhracata Etkisi: Türkiye Ekonomisi İçin Ekonometrik Bir Analiz. Business and Economics Research Journal, 13(1), 11-30.
  • Ermisoglu, E., & Kanik, B. (2013). Turkish Economic Policy Uncertainty Index. Munich Personal RePEc Archive (MPRA) Working Paper, No, 49920.
  • Ghosh, T., Sahu, S., & Chattopadhyay, S. (2021). Inflation Expectations of Households in India: Role of oil prices, Economic Policy Uncertainty, and Spillover of Global Financial Uncertainty. Bulletin of Economic Research, 73(2), 230-251.
  • Gürsoy, S. & Zeren, F. (2022). Ekonomik Politika Belirsizliği ve Borsa İlişkisi: G7 Ve Brıc Ülkeleri Örneği. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, (61), 353-368.
  • http://data.imf.org (Access date: 01.27.2022).
  • http://www.policyuncertainty.com (Access date: 01.28.2022).
  • https://tr.investing.com (Access date: 01.28.2022).
  • Jeong, K., Härdle, W. K., & Song, S. (2012). A Consistent Nonparametric Test for Causality in Quantile. Econometric Theory, 28(04), 861-887.
  • Jirasavetakul, L. F., & Spilimbergo, A. (2018). Economic Policy Uncertainty in Turkey. International Monetary Fund Working Paper, No, 18/272.
  • Juhro, S. M., & Phan, D. H. B. (2018). Can Economic Policy Uncertainty Predict Exchange Rate and Its Volatility? Evidence from Asean Countries. Bulletin of Monetary Economics and Banking, 21(2), 263-279.
  • Kido, Y. (2016). On the Link between the US Economic Policy Uncertainty and Exchanges. Economics Letters, 144, 49-52.
  • Korkmaz, O., & Gungor, S. (2018). The Impact of Global Economic Policy Uncertainty on Stock Returns of Selected Index Traded on Istanbul Stock Exchange. Journal of Social Sciences of Mus Alparslan University, 6(ICEESS’18), 211-219.
  • Kostak, N. (2021). Döviz Kuru Dalgalanmalarının Pay Senedi Piyasasına Etkisi: Markov Swıtchıng Model Uygulaması (Yayımlanmamış Doktora Tezi). Sakarya Üniversitesi, Sakarya.
  • Krol, R. (2014). Economic Policy Uncertainty and Exchange Rate Volatility. International Finance, 17(2), 241-256.
  • Leduc, S., & Liu, Z. (2016). Uncertainty Shocks Are Aggregate Demand Shocks. Journal of Monetary Economics, 82(C), 20-35.
  • Liming, C., Ziqing, D., & Zhihao, H. (2019). Impact of Economic Policy Uncertainty on Exchange Rate Volatility of China. Finance Research Letters, In Press.
  • Nishiyama, Y., Hitomi, K., Kawasaki, Y., & Jeong, K. (2011) A Consistent Nonparametric Test for Nonlinear Causality-Specification in Time Series Regression. Journal of Econometrics, 165(1), 112-127.
  • Olanipekun, I, O., Williams, G. O., & Gungor, H. (2019). Impact of Economic Policy Uncertainty on Exchange Market Pressure. SAGE Open, 9(3), 1-13.
  • Özkan, O. (2020). ABD’nin Ekonomik Politika ve Ticaret Politikası Belirsizlikleri ile Dolar-TL Kuru Arasındaki Nedensellik İlişkisi. 19. Uluslararası İşletmecilik Kongresi, Erciyes Üniversitesi, Kayseri.
  • Özkan, O. (2020). Jeopolitik Risklerin Döviz Piyasaları Üzerindeki Etkileri: Parametrik Olmayan Kantil Nedensellik Testi ile BRICS-T Ülkeleri Üzerine Ampirik Bir Çalışma. Muhasebe Bilim Dünyası Dergisi, 22(4), 611-628.
  • Pindyck, R. S. (1988). Irreversible Investment, Capacity Choice, and the Value of the Firm. American Economic Review, 78(5), 969-85.
  • Rodrik, D. (1991). Policy Uncertainty and Private Investment in Developing Countries. Journal of Development Economics, 36(2), 229-242.
  • Sahinoz, S., & Cosar, E. E. (2018). Economic Policy Uncertainty and Economic Activity in Turkey. Applied Economics Letters, 25(21), 1517-1520.
  • Tiryaki, H. N., & Tiryaki, A. (2019). Determinants of Turkish Stock Returns Under The Impact of Economic Policy Uncertainty. International Journal of Economic and Administrative Studies, 22, 147-162.
  • Tumturk, O. (2017). Exchange Rate Pass-Through into Domestic Prices and Inflation Targeting in Turkey. Journal of Management and Economics, 24(3), 837-855.
  • Yılmaz, T. (2022). Ekonomik Belirsizlik, Ham Petrol ve Altın Fiyatları, Temiz Enerji Şirketleri Borsa Endeksi Arasındaki Dinamik İlişkilerin İncelenmesi. F. Kalay (Ed.) İktisadi ve idari Bilimler Teori, Güncel Araştırmalar ve Yeni Eğilimler 4. İçinde (ss. 53-74). Karadağ: İVPE Yay.

Ekonomi Politika Belirsizliğinin Döviz Kurlarının Getirileri ve Oynaklığı Üzerinde Nedensel Etkileri: Türkiye’den Ampirik Kanıtlar

Year 2024, Volume: 26 Issue: 1, 153 - 163, 04.04.2024
https://doi.org/10.32709/akusosbil.1103206

Abstract

Bu çalışma, ekonomik politika belirsizliğinin (EPB) Türkiye döviz kurlarının getirileri ve oynaklığı üzerindeki nedensel etkilerini Şubat 1998'den Aralık 2019'a kadar olan aylık verilerle yeni bir ekonometrik metod olan parametrik olmayan kantil nedensellik yaklaşımını uygulayarak araştırmaktadır. Bu yaklaşım, θ-inci nicelikteki (olmayan) nedenselliği yalnızca ortalama (ilk moment, yani m=1) veya varyans (ikinci moment, yani m=2) olarak araştırma fırsatı verir. Ayrıca ortalama ve varyansta (m=1 ve 2) art arda nedensellik (olmayan) bulunur. Özetle, bu yaklaşım, getirilerin karesini alarak oynaklığı hesaplar. Çalışmada Amerika, Avustralya, Avrupa Birliği, Japonya, Kanada ve Birleşik Krallık'ın EPB endeksleri ve para birimlerinin (sırasıyla USD, AUD, EUR, JPY, CAD, GBP) Türk Lirası (TRY) karşısındaki değerleri kullanılmış ve Avustralya, Avrupa Birliği ve Japonya'nın EPB’sinin sırasıyla AUD/TRY, EUR/TRY ve JPY/TRY döviz kurlarının getirilerini etkilediği bulunmuştur. Bu sonuçlar, söz konusu ülkelerin EPB endekslerinin ilgili Türk döviz kurlarının getirileri ve oynaklıkları hakkında fikir verebileceğini göstermektedir. Bu çalışmanın bulguları, politika yapıcılar, yatırımcılar, firmalar, ihracatçılar ve ithalatçılar için önemli çıkarımlar sağlamaktadır. Ayrıca Türkiye'ye oluşturulacak EPU endeksinin Türk döviz kurları veya diğer Türk finansal varlıkları üzerindeki etkileri konusunda da bazı çalışmalar yapılabilir.

References

  • Aksoy, A. & Tanrioven, C. (2007). Sermaye Piyasası Yatırım Araçları ve Analizi. Ankara: Gazi Kitabevi.
  • Apergis, N., Bonato, M., Gupta, R. & Kyei, C. (2018). Does Geopolitical Risks Predict Stock Returns and Volatility of Leading Defense Companies? Evidence from a Nonparametric Approach. Defence and Peace Economics, 29(6), 684-696.
  • Arbatli, E. C., Davis, S. J., Ito, A. & Miake, N. (2019). Policy Uncertainty in Japan. NBER Working Paper, No, 23411.
  • Arrow, K. J. (1968). Optimal Capital Policy and Irreversible Investment. in J. N. Wolfe (ed.), Value, Capital, and Growth, University of Chicago Press, 1-20.
  • Aslan, Ç. & Akpiliç, F. (2022). Döviz Kuru Belirsizliklerinin Türkiye’nin Teknoloji İçeriğine Göre Sınıflandırılan Ürünlerin İhracat Akımlarına Etkileri: Panel Ardl Analizi. Anadolu Akademi Sosyal Bilimler Dergisi, 4 (1) , 90-108.
  • Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring Economic Policy Uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636.
  • Bal, H., Akca, E. E., & Demiral, M. (2017). The Influences of Exchange Rate Changes on Turkey’s Trade with the European Union. Kahramanmaraş Sütçü İmam University Faculty of Economics and Administrative Sciences Journal, 7(2), 61-82.
  • Balcilar, M., Gupta, R., Kyei, C., & Wohar, M. E. (2016). Does Economic Policy Uncertainty Predict Exchange Rate Returns and Volatility? Evidence from a Nonparametric Causality-in-Quantiles Test. Open Economies Review, 27(2), 229-250.
  • Balcilar, M., Gupta, R., Nguyen, D. K., & Wohar, M. E. (2018). Causal Effects of the United States and Japan on Pacific-Rim Stock Markets: Nonparametric Quantile Causality Approach. Applied Economics, 50(53), 5712-5727.
  • Bartsch, Z. (2018). Economic Policy Uncertainty and Dollar-Pound Exchange Rate Return Volatility. Journal of International Money and Finance, 98, 1-17.
  • Beckmann, J., & Czudaj, R. (2017). Exchange Rate Expectations and Economic Policy Uncertainty. European Journal of Political Economy, 47, 148-162.
  • Bernanke, B. S. (1983). Irreversibility, Uncertainty, and Cyclical Investment. Quarterly Journal of Economics, 98(1), 85-106.
  • Bhatia, V., Das, D., Tiwari, A. K., & Shahbaz, M. (2018). Do Precious Metal Spot Prices Influence Each Other? Evidence from a Nonparametric Causality-in-Quantiles Approach. Resources Policy, 55, 244-252.
  • Boyacioglu, M. A., & Curuk, D. (2016). Effect of Foreign Exchange Rate Changes to the Stock Returns: An Application on the Istanbul Stock Exchange 100 Index. The Journal of Accounting and Finance, 70, 143-156.
  • Brock, W., Dechert, D., Scheinkman, J., & LeBaron, B. (1996). A Test for Independence Based on the Correlation Dimension. Econometric Reviews, 15(3), 197-235.
  • Dai, Y., Zhang, J., Yu, X., & Li, X. (2017). Causality Between Economic Policy Uncertainty and Exchange Rate in China with Considering Quantile Differences. Theoretical and Applied Economics, 24(3), 29-38.
  • Das, D., Kumar, S. B., Tiwari, A. K., Shahbaz, M., & Hasim, H. M. (2018). On the Relationship of Gold, Crude Oil, Stocks with Financial Stress: A Causality-in-Quantiles Approach. Finance Research Letters, 27, 169-174.
  • Daştan, M. & Karabulut, K. (2022). Küresel Ekonomik Politika Belirsizliklerinin Makroekonomik Aktivite Üzerindeki Etkileri: Türkiye Örneği. Ataturk University Journal of Economics & Administrative Sciences, 36 (1), 133-142.
  • Davis, S. J., Liu, D., & Sheng, X. S. (2019). Economic Policy Uncertainty in China since 1949: The View from Mainland Newspapers. Working Paper, Mimeo.
  • Demir, E., & Ersan, O. (2018). The Impact of Economic Policy Uncertainty on Stock Returns of Turkish Tourism Companies. Current Issues in Tourism, 21(8), 847-855.
  • Dumrul, C. & Gokalp, K. H. (2022). Döviz Kuru Oynaklığının İhracata Etkisi: Türkiye Ekonomisi İçin Ekonometrik Bir Analiz. Business and Economics Research Journal, 13(1), 11-30.
  • Ermisoglu, E., & Kanik, B. (2013). Turkish Economic Policy Uncertainty Index. Munich Personal RePEc Archive (MPRA) Working Paper, No, 49920.
  • Ghosh, T., Sahu, S., & Chattopadhyay, S. (2021). Inflation Expectations of Households in India: Role of oil prices, Economic Policy Uncertainty, and Spillover of Global Financial Uncertainty. Bulletin of Economic Research, 73(2), 230-251.
  • Gürsoy, S. & Zeren, F. (2022). Ekonomik Politika Belirsizliği ve Borsa İlişkisi: G7 Ve Brıc Ülkeleri Örneği. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, (61), 353-368.
  • http://data.imf.org (Access date: 01.27.2022).
  • http://www.policyuncertainty.com (Access date: 01.28.2022).
  • https://tr.investing.com (Access date: 01.28.2022).
  • Jeong, K., Härdle, W. K., & Song, S. (2012). A Consistent Nonparametric Test for Causality in Quantile. Econometric Theory, 28(04), 861-887.
  • Jirasavetakul, L. F., & Spilimbergo, A. (2018). Economic Policy Uncertainty in Turkey. International Monetary Fund Working Paper, No, 18/272.
  • Juhro, S. M., & Phan, D. H. B. (2018). Can Economic Policy Uncertainty Predict Exchange Rate and Its Volatility? Evidence from Asean Countries. Bulletin of Monetary Economics and Banking, 21(2), 263-279.
  • Kido, Y. (2016). On the Link between the US Economic Policy Uncertainty and Exchanges. Economics Letters, 144, 49-52.
  • Korkmaz, O., & Gungor, S. (2018). The Impact of Global Economic Policy Uncertainty on Stock Returns of Selected Index Traded on Istanbul Stock Exchange. Journal of Social Sciences of Mus Alparslan University, 6(ICEESS’18), 211-219.
  • Kostak, N. (2021). Döviz Kuru Dalgalanmalarının Pay Senedi Piyasasına Etkisi: Markov Swıtchıng Model Uygulaması (Yayımlanmamış Doktora Tezi). Sakarya Üniversitesi, Sakarya.
  • Krol, R. (2014). Economic Policy Uncertainty and Exchange Rate Volatility. International Finance, 17(2), 241-256.
  • Leduc, S., & Liu, Z. (2016). Uncertainty Shocks Are Aggregate Demand Shocks. Journal of Monetary Economics, 82(C), 20-35.
  • Liming, C., Ziqing, D., & Zhihao, H. (2019). Impact of Economic Policy Uncertainty on Exchange Rate Volatility of China. Finance Research Letters, In Press.
  • Nishiyama, Y., Hitomi, K., Kawasaki, Y., & Jeong, K. (2011) A Consistent Nonparametric Test for Nonlinear Causality-Specification in Time Series Regression. Journal of Econometrics, 165(1), 112-127.
  • Olanipekun, I, O., Williams, G. O., & Gungor, H. (2019). Impact of Economic Policy Uncertainty on Exchange Market Pressure. SAGE Open, 9(3), 1-13.
  • Özkan, O. (2020). ABD’nin Ekonomik Politika ve Ticaret Politikası Belirsizlikleri ile Dolar-TL Kuru Arasındaki Nedensellik İlişkisi. 19. Uluslararası İşletmecilik Kongresi, Erciyes Üniversitesi, Kayseri.
  • Özkan, O. (2020). Jeopolitik Risklerin Döviz Piyasaları Üzerindeki Etkileri: Parametrik Olmayan Kantil Nedensellik Testi ile BRICS-T Ülkeleri Üzerine Ampirik Bir Çalışma. Muhasebe Bilim Dünyası Dergisi, 22(4), 611-628.
  • Pindyck, R. S. (1988). Irreversible Investment, Capacity Choice, and the Value of the Firm. American Economic Review, 78(5), 969-85.
  • Rodrik, D. (1991). Policy Uncertainty and Private Investment in Developing Countries. Journal of Development Economics, 36(2), 229-242.
  • Sahinoz, S., & Cosar, E. E. (2018). Economic Policy Uncertainty and Economic Activity in Turkey. Applied Economics Letters, 25(21), 1517-1520.
  • Tiryaki, H. N., & Tiryaki, A. (2019). Determinants of Turkish Stock Returns Under The Impact of Economic Policy Uncertainty. International Journal of Economic and Administrative Studies, 22, 147-162.
  • Tumturk, O. (2017). Exchange Rate Pass-Through into Domestic Prices and Inflation Targeting in Turkey. Journal of Management and Economics, 24(3), 837-855.
  • Yılmaz, T. (2022). Ekonomik Belirsizlik, Ham Petrol ve Altın Fiyatları, Temiz Enerji Şirketleri Borsa Endeksi Arasındaki Dinamik İlişkilerin İncelenmesi. F. Kalay (Ed.) İktisadi ve idari Bilimler Teori, Güncel Araştırmalar ve Yeni Eğilimler 4. İçinde (ss. 53-74). Karadağ: İVPE Yay.
There are 46 citations in total.

Details

Primary Language English
Subjects Financial Markets and Institutions
Journal Section Economics and Administrative Sciences
Authors

Recep Çakar 0000-0002-4069-7653

Publication Date April 4, 2024
Submission Date April 13, 2022
Published in Issue Year 2024 Volume: 26 Issue: 1

Cite

APA Çakar, R. (2024). The Causal Effects of Economic Policy Uncertainty on Changes in Exchange Rates and Volatility: Empirical Evidence from Türkiye. Afyon Kocatepe Üniversitesi Sosyal Bilimler Dergisi, 26(1), 153-163. https://doi.org/10.32709/akusosbil.1103206

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