The Effects of Macroeconomic Variables on the BIST 100 Index: ARDL and NARDL Approaches

Abstract

The objective of this research is to analyze the signal, magnitude, and significance of both symmetric and asymmetric effects of interest rate, taxes, exchange rate, oil price, and gold price on the Turkish stock market (BIST100). The autoregressive distributed lag (ARDL) technique was used in both linear and non-linear formats. The F-Bounds test of the linear ARDL test suggests that the variables do not exhibit long-term integration. Nevertheless, the F-bounds test of the nonlinear ARDL (NARDL) test confirms the presence of cointegration among the variables. Therefore, the research heavily relies on the NARDL model. The empirical evidence indicates the long-term influence of the exchange rates rate, gold price, and interest rate on the BIST100 index is asymmetric. Additionally, the asymmetrical effects of interest rates, taxes, exchange rates, oil prices, and gold prices in the short term have an impact on the BIST100.

Keywords

• Interest rate
• Oil price
• Nonlinear ARDL
• Stock price
• Exchange rate

The Effects of Macroeconomic Variables on the BIST 100 Index: ARDL and NARDL Approaches

Abstract

The objective of this research is to analyse the signal, magnitude, and significance of both symmetric and asymmetric effects of interest rate, taxes, exchange rate, oil price, and gold price on the Turkish stock market (BIST100). The autoregressive distributed lag (ARDL) technique was used in both linear and non-linear formats. The F-Bounds test of the linear ARDL test suggests that the variables do not exhibit long-term integration. Nevertheless, the F-bounds test of the nonlinear ARDL (NARDL) test confirms the presence of cointegration among the variables. Therefore, the research heavily relies on the NARDL model. The empirical evidence indicates the long-term influence of the exchange rates rate, gold price, and interest rate on the BIST100 index is asymmetric. Additionally, the asymmetrical effects of interest rates, taxes, exchange rates, oil prices, and gold prices in the short term have an impact on the BIST100.

Keywords

• Stock price
• Interest rate
• Exchange rate
• Oil price
• Nonlinear ARDL

Ethical Statement

Ethics Statement for "The Effects of Two Rates and Two Prices on the BIST100: ARDL and NARDL Approaches" Commitment to Ethical Research Practices: Our study adheres to the highest ethical standards in economic research, with a specific focus on financial markets. We have conducted our research with integrity, ensuring accuracy and honesty in every phase of our work. Data Integrity and Transparency: The data used in our analysis, particularly about the BIST100 index, interest rates, and price levels, have been collected, processed, and utilized with strict adherence to ethical standards. We ensure transparency in data sourcing, and all data sources are duly acknowledged. Our methodology, including the ARDL (Autoregressive Distributed Lag) and NARDL (Nonlinear Autoregressive Distributed Lag) approaches, is described in detail to facilitate reproducibility and scrutiny. Conflict of Interest Disclosure: The authors declare no financial or other conflicts of interest that could have influenced the outcomes of this study. This research is conducted objectively, and our findings are presented impartially, free from any bias or influence from external parties. Compliance with Ethical Guidelines: This research complies with the ethical guidelines and standards set forth by the "International Journal of Public Finance." We have adhered to all institutional and national guidelines pertinent to economic research in Turkey, particularly in financial market analysis. Ethical Considerations in Reporting: Our findings and conclusions are reported with the utmost responsibility and integrity. We have avoided misrepresentation or exaggeration of our research outcomes. The limitations of our study are transparently discussed, ensuring that our contributions to the field are presented with academic honesty. Responsibility Towards Stakeholders: Recognizing the potential impact of our research on stakeholders, including policymakers, investors, and academicians, we have conducted our study with a deep sense of responsibility. Our aim is to contribute constructively and accurately to the understanding of monetary policies' and gold and petrol prices effects on financial markets, particularly the BIST100 index.

Thanks

This Paper has been presented at The Sixth International Conference on Economics (EconAnadolu2022) held at Anadolu University, Eskişehir, Turkey, May 13-15, 2022. We want to thank the participants of the conference for their insightful suggestions.

References

1. Alam, M.M., Uddin, M.G.S., (2010). Relationship between Interest Rate and Stock Price: Empirical Evidence from Developed and Developing Countries, International Journal of Business and Management, Vol. 4, No. 3, p.3. Available at SSRN: https://ssrn.com/abstract=2941281.
2. Alamgir, S.B. Amin, (2021). The nexus between oil price and stock market: Evidence from South Asia, Energy Reports, V.7, P. 693-703, Doi: https://doi.org/10.1016/j.egyr.2021.01.027.
3. Andrea, B., Matteo, M.Ş (2017), How does stock market volatility react to oil price shocks? Macroeconomic Dynamics, P. 1 -17, doi:10.1017/S1365100516000353.
4. Ankit, S., Sasmita.G., Harsh. V, Sujeet. S, Rohan. S, Vishwaroop S., (2018). Relationship between Crude Oil Price and Stock Market: Evidence from India, International Journal of Energy Economics and Policy, 8(4), 331-337. available at http: www.econjournals.com.
5. Arouri, M., Foulquier, P., Fouquau, J., (2011). Oil Price and Stock Markets in Europe: A Sector Perspective, Recherches économiques de Louvain, Vol. 77, P: 2-30. https://doi.org/10.3917/rel.771.0005.
6. Barut, A., Karaoğlan, S., Karabayır, M. E., (2017). Faiz oranı - döviz kuru ve Bist100 etkileşimi: eş - bütünleşme analizi, Kaüiibfd 8(16), 503- 523. doi:10.9775/kauiibfd.2017.024.
7. Borensztein, E., Gregorio, JD., Lee, J-W., (1995). How does FDI affect economic growth, Journal of International Economics, vol. 45, no. 1, pp. 115-135. Doi: 10.3386/w5057.
8. Çakır, M., (2021). The Impact of Exchange Rate on Stock Markets in Turkey: Evidence from Linear and Non-Linear ARDL Models. Intech Open Journals, Doi: 10.5772/intechopen.96068.

9. Chu-Chia, L., Chung-Rou, F., Hui-Pei, C., (2008). Relationships Between Oil Price Shocks and Stock Market: An Empirical Analysis from China. Energy Policy. 36. 3544-3553. Doi: 10.1016/j.enpol.2008.06.006.
10. Citak, F., Kendirli, S., (2019). Petrol fiyatlarinin döviz kuru ve hisse senedi getirileri üzerindeki asimetrik etkisi: türkiye örneği, Finans Ekonomi ve Sosyal Araştırmalar Dergisi Cilt4/Sayı4, Doi: 10.29106/fesa.658845.
11. Dang, V., Le, T., Nguyee, Q., Tran, D., (2020). Linkage Between Exchange Rate and Stock Price: Evidence from Vietnam, Journal of Asian Finance, Economics, and Business Vol 7, No 12, P. 95–107, Doi: 10.13106/jafeb.2020.vol7.no12.095.
12. Darrat, A.F. (1988). On Fiscal Policy and the Stock Market. Journal of Money, Credit and Banking, 20, 353-363.
13. Dornbusch, R., & Fischer, S. (1980). Exchange Rates and the Current Account. The American Economic Review, 70(5), 960–971. http://www.jstor.org/stable/1805775.
14. Erdem, C., Arslan, K., Erdem, M., (2005). Effects of macroeconomic variables on Istanbul stock exchange indexes, Applied Financial Economics, 15:14, 987-994, DOI: 10.1080/09603100500120365
15. Frankel, A. (1985). The Dazzling Dollar. Brookings Papers on Economic Activity, vol, no. 1, pp. 199–217. Guangtong. G., Wenjie. Z., Chengjun, W., (2021). Time-varying influence of interest rate on stock returns evidence from China, Economic Research-Ekonomska Istraživanja, Doi: 10.1080/1331677X.2021.1966639.
16. Hamad Ameen, M.H., Kamışlı, M., Temizel F., (2020). The Impact of Exchange Rate Onon Stock Market Indices, Business & Amp; Management Studies: An International Journal, 8(2), 2044–2062. https://doi.org/10.15295/bmij.v8i2.1485.
17. Hikmet, A., Kübra, K., Melahat, B.A., (2019). Asymmetric Relationship between Oil Price and Stock Returns: The Example of Turkey. Conference: International Conference on Social Sciences, https://www.researchgate.net/publication/338358250.
18. Huang, D., Masulis, W. and Stoll, R., (1996) Energy Shocks and Financial Markets. Journal of Futures Markets, Vol. 16, No. 1, pp. Available at SSRN: https://ssrn.com/abstract=900741.
19. Hunjra, A.I., Chani, M.I., Shahzad, M., Farooq, M., Khan, K., (2014). The Impact of Macroeconomic Variables on Stock Price in Pakistan. International Journal of Economics and Empirical Research. 2(1), 13-21. Online at https://mpra.ub.uni-muenchen.de/60791/.
20. Ikechukwu, M., Omotayo, K., (2019). The impact of changes in oil price on the stock market: Evidence from Africa, International Journal of Management, Economics and Social Sciences (IJMESS), ISSN 2304-1366, IJMESS International Publishers, Jersey City, NJ, Vol. 8, Iss. 3, pp. 169-194, http://dx.doi.org/10.32327/IJMESS/8.3.2019.11.
21. Jones, M., and Kaul, G., (1996) Oil and the Stock Markets. J. OF FINANCE, Vol. 51 No. 2, Available at SSRN: https://ssrn.com/abstract=7805.
22. Laopodis, N.T. (2009). Fiscal policy and stock market efficiency: Evidence for the United States. The Quarterly Review of Economics and Finance, 49, 633-650.
23. Maryam, A., Walaa, H., Areej, I., Allam, H., (2018). The Relationship of Gold Price with the Stock Market: The Case of Frankfurt Stock Exchange, International Journal of Energy Economics and Policy, V. 8(5), P. 357-371. ISSN: 2146-4553, available at http: www.econjournals.com.
24. Massomeh, H., Omar, M., (2017). The Impact of Interest Rate Volatility on Stock Market Development: Evidence from Emerging Markets. The Journal of Developing Areas, 51(2), 301–313. doi:10.1353/jda.2017.0046
25. Mbanga, C.L., & Darrat, A.F. (2016). Fiscal policy and the US stock market. Review of Quantitative Finance and Accounting, 47, 987-1002.
26. Mohammed, M., Şahin., (2020). An Analysis on the Relationship between Exchange Rate and Stock Price in the Short-Run and Long-Run: NARDL Model Results for the Kuwait Economy, Cankırı Karatekin University, Journal of the Faculty of Economics and Administrative Sciences, Volume 10, Issue 2, pp. 397-426. doi: 10.18074/ckuiibfd.636490.
27. Mollick, A. V., Amin, M. R., (2021). Occupancy, oil price, and stock returns: Evidence from the U.S. airline industry. Journal of Air Transport Management, 91, 102015. doi: 10.1016/j.jairtraman.2020.10.
28. Moussa, F.M., Delhoumi, E., (2021). The asymmetric impact of interest and exchange rate on the stock market index: evidence from MENA region. International Journal of Emerging Markets. https://www.emerald.com/insight/1746-8809.htm.
29. Muhammad, K., (2019), Impact of Exchange Rate on Stock Returns in Shenzhen Stock Exchange: Analysis Through ARDL Approach, International Journal of Economics and Management Vol. 1 Issue (2) pp 15 – 26. Available at SSRN: https://ssrn.com/abstract=3384828.
30. Muhammad, S., Abdul A., Gobind M., (2016). Impact of gold price on stock exchange market: a case of Karachi stock exchange market of Pakistan, International Journal of Accounting and Economics Studies, V. 4 (1), P. 60-63.
31. Rastogi, S., (2016). Gold price, crude oil, exchange rate, and stock markets: cointegration and neural network analysis. International Journal of Corporate Finance and Accounting (IJCFA), 3(2), 1-13.‏ doi:10.4018/IJCFA.2016070101.
32. Razin, A. (1990). Fiscal policies and the integrated world stock market. Journal of International Economics, 29, 109-122.
33. Şahin, S., (2015). Crude oil and stock market price: evidence from an emerging market, Ç.Ü. Sosyal Bilimler Enstitüsü Dergisi, Cilt 24, Sayı 1, 2015, Sayfa 61-70. Retrieved from https://dergipark.org.tr/tr/pub/cusosbil/issue/32041/353782.
34. Saka Ilgın, K. (2019) (2019). Altın ve petrol fiyatları ile volatilite endekslerinin hisse senedi piyaslari üzererindeki etkesi: Gelişmekte olan ülkeler üzerine bir inceleme, Doktora Tezi, Erzincan Binali Yildirim Üniversitesi, Sosyal Bilimler Enstitüsü işletme anabilim dali, (erzincan.edu.tr).
35. Sentürk, M., & Dücan, E. (2014). Türkiye’de Döviz Kuru-Faiz Oranı ve Borsa Getirisi İlişkisi: Ampirik bir Analiz, Business and Economics Research Journal 5(3), 67, -80 ISSN: 1309-2448 www.berjournal.com.
36. Seri, S. M., Dileep, K., Farhan, J., Saqib, M., (2015). Impact of Exchange Rate on Stock Market, International Journal of Economics and Financial, Vol 5, p. 385-388, available at http: www.econjournals.com.
37. Shi, Y., Yang, L., Huang, M., Jun Huang, S., (2021). Multi-Factorized Semi-Covariance of Stock Markets and Gold Price, J. Risk Financial Manag. 2021, 14, 172. https://doi.org/10.3390/jrfm14040172.
38. Shin, Y., Yu, B., Greenwood-Nimmo, M., (2014). Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework. In W. Horrace, & R. Sickles (Eds.). The Festschrift in Honor of Peter Schmidt.: Econometric Methods and Applications (pp. 281-314). Springer. https://doi.org/10.1007/978-1-4899-8008-39.
39. Taufiq C., Syed S., Sarosh, S., (2015). Relationship between gold and stock markets during the global financial crisis: Evidence from nonlinear causality tests. International Review of Financial Analysis. 41. Doi: 10.1016/j.irfa.2015.03.011.
40. Trabelsia, N., Giray, G., Aviral, K.T., Shawkat, H., (2021). Effects of Price of Gold on Bombay Stock Exchange Sectoral Indices: New Evidence for Portfolio Risk Management, Research in International Business and Finance, V. 55, 101316, https://doi.org/10.1016/j.ribaf.2020.101316.
41. Ürkmez, E., an Bölükbaş, F., 2021. The impact of exchange rates on stock prices for turkey: an asymmetric non-linear cointegration analysis, Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. Cilt: 43. Sayı: 1 ISSN: 2587-2672, ss/pp. 42-56 DOI: 10.14780/muiibd.960267.
42. Yacouba, K., Altıntaş, H., 2019. The Asymmetric Impact of Macroeconomic Shocks on Stock Returns in Turkey, Romanian Journal of Economic Forecasting –XXII (2), P. 98-116. Available at http://www.ipe.ro/rjef/rjef2_19/rjef2_2019p98-116.pdf.