TESTING THE HYPOTHESIS OF FINANCIAL CONVERGENCE WITH WAVELET ANALYSIS: EMPIRICAL EVIDENCE FROM E7 COUNTRIES

Year 2024, Volume: 20 Issue: 4, 1250 - 1272, 31.12.2024

Yunus Kaya

https://doi.org/10.17130/ijmeb.1538689

Abstract

The aim of this study is to test the financial convergence hypothesis in E7 countries (China,
India, Brazil, Russia, Mexico, Indonesia and Turkey). To achieve this, the study assesses the convergence
of the financial development index of the E7 countries to that of the United States of America (USA).
Annual data on the financial development index from the IMF database, covering 1985 to 2021, were
utilized. The analysis employs the traditional Augmented Dickey-Fuller (ADF) unit root test alongside
the Fourier ADF (FADF) unit root test to evaluate the validity of the financial convergence hypothesis.
Furthermore, ADF and FADF tests are re-administered to the data series that has been decomposed
through wavelet transformation, with an analysis provided for short-, medium--, and long-term results.
The findings indicate that, based on the original series of tests, the financial convergence hypothesis is
partially upheld in the E7 countries. Moreover, results obtained from the decomposed series demonstrate
that this hypothesis is valid in the short term for all E7 nations while only partially valid in the medium and long term. These findings underline the disparities in financial development between the E7 countries
and developed nations, suggesting that substantial policy reforms in financial management are imperative for these countries.

Keywords

Financial Convergence, Financial Development, Wavelet Analysis, E7 Countries

FİNANSAL YAKINSAMA HİPOTEZİNİN WAVELET ANALİZİ İLE TEST EDİLMESİ: E7 ÜLKELERİNDEN AMPİRİK KANITLAR

Abstract

Bu çalışmanın amacı, E7 (Çin, Hindistan, Brezilya, Rusya, Meksika, Endonezya ve Türkiye)
ülkelerinde finansal yakınsama hipotezini test etmektir. Bu amaç doğrultusunda E7 ülkelerinin finansal
gelişme endeksinin Amerika Birleşik Devletleri (ABD) finansal gelişme endeksine yakınsaması test
edilmiştir. Çalışmada IMF veri tabanından elde edilen ve 1985-2021 dönemlerine ait yıllık finansal
gelişim endeks verileri kullanılmıştır. Çalışmada finansal yakınsama hipotezinin geçerliliği klasik
Augmented Dickey ve Fuller (ADF) ve Fourier ADF (FADF) birim kök testleri ile test edilmiştir. Bunun
yanı sıra çalışmada wavelet dönüşümü kullanılarak ayrıştırılan serilere ADF ve FADF birim kök testleri
yeniden uygulanarak sonuçlar kısa, orta ve uzun vadede değerlendirilmiştir. Çalışma sonuçlarına göre,
orijinal serilerle yapılan testler sonucunda E7 ülkelerinde finansal yakınsama hipotezi kısmen geçerli
bulunmuştur. Ayrıştırılmış serilerin sonuçlarına göre ise kısa vadede E7 ülkelerinin tamamında finansal
yakınsama hipotezi geçerliyken, orta ve uzun dönemde kısmen geçerli bulunmuştur. Bu sonuçlar gelişmiş
ülkelere nazaran E7 ülkelerinde finansal gelişim açısından farklılıklar bulunduğunu göstermekte ve bu
ülkelerde finansal açıdan önemli politika değişikliklerinin gerçekleşmesi gerektiğini belirtmektedir.

Keywords

Finansal Yakınsama, Finansal Gelişme, Wavelet Analizi, E7 Ülkeleri

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