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The Effects of Economic Policy Uncertainty and Oil Price Shocks on Stock Returns: A Structural VAR Analysis on Türkiye

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  • Fatma Ünlü

    (Erciyes Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisat Bölümü, Kayseri, Türkiye)

Abstract

In recent years, the effects of global shocks caused by fluctuations in economic policy uncertainty and oil price fluctuations on financial markets have been among the most frequently discussed topics in the literature and resultantly become the center of attention of researchers and policymakers, especially for fragile economies. This study aims to contribute to the investigation of the effects of global economic policy uncertainty and oil price shocks on stock returns. To this end, the article follows the econometric procedure of structural VAR analysis using Türkiye’s monthly data for the period of 2014:01-2023:06. The study uses the Global Economic Policy Uncertainty Index, the global price of Brent crude oil, the Bursa Istanbul (BIST)-100 Return Index, the Consumer Price Index (CPI)-based real effective exchange rate, and interest rate as its variables. According to the empirical findings obtained from the analysis, a negative relationship exists between global economic policy uncertainty and the BIST-100 Return Index, while a positive relationship exists between the global price of Brent crude oil and the BIST-100 Return Index. However, real exchange rate shocks explain most of the changes in the BIST-100 Return Index. The impact of interest rate changes is also more significant than economic policy uncertainty and oil price shocks. Accordingly, exchange and interest rate changes significantly impact Türkiye’s stock market returns.

Suggested Citation

  • Fatma Ünlü, 2024. "The Effects of Economic Policy Uncertainty and Oil Price Shocks on Stock Returns: A Structural VAR Analysis on Türkiye," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 11(2), pages 158-185, July.
    • Handle: RePEc:ist:iujepr:v:11:y:2024:i:2:p:158-185
    DOI: 10.26650/JEPR1410149
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic policy uncertainty; Oil prices shocks; Stock market; SVAR analysis JEL Classification : D80 ; D53 ; C22;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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