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BIST, FOREIGN CAPITAL AND EXCHANGE RATE RELATIONS: 1988-2015

Year 2018, Volume: 19 Issue: 1, 244 - 258, 31.05.2018

Ömer Selçuk Emsen , Ensar Ağırman

Abstract

In this study, the Borsa Istanbul index, which reflects its reaction to short-term changes in the economy, has been transformed into real (RBIST) with the US dollar. RBIST with Real Exchange Rate (RER) as the short-run variables that either affect RBIST or affected by it, foreign direct investment (FDI) to GDP ratio (FDIY) and the ratio of portfolio investments to GDP (PIY) as both short and long-term indirect capital investments were taken into consideration in this study. This study which is on the relationship between these four variables covers the period from 1988 to 2015 and the data are taken on an annual basis. According to the results of the stationary survey, it was determined that while some of the series were stationary in the level and some of them were stationary in the first difference. According to the causality analysis with stationary series, one-way causal relations from RBIST to FDIY and RER to FDIY were obtained. According to this, it can be said that the real economy policies in Turkey have triggered direct foreign capital attraction and the stock market has attracted direct foreign capital as a leading indicator.

Keywords

Stock exchange Direct and indirect investments Real exchange rate

References

  • Jamil, Maheen and Naeem Ullah (2013), “Impact of Foreign Exchange Rate on Stock Prices”, IOSR Journal of Business and Management, 7 (3), pp: 45-51.
  • Malik, Ihtisham Abdul and Shehla Amjad, (2013), “Foreign Direct Investment and Stock Market Development in Pakistan”, Journal of International Trade Law and Policy, 12 (3), pp: 226-242.
  • Özdemir, Dilek, Özge Buzdağlı, Murat Akdağ ve Ö. Selçuk Emsen (2016), “Rusya Borsasının Petrol Fiyatlarına Bağımlılığı”, International Conference on Economics Finance and Banking, Kaposvar-Macaristan, 29-31 August 2016, ss: 632-640.
  • Paramati, Sudharshan Reddy, Mallesh Ummalla and Nicholas Apergis (2016), “The Effect of Foreign Direct Investment and Stock Market Growth on Clean Energy Use Across A Panel of Emerging Market Economies”, Energy Economics, 56, pp: 29-41.
  • Pal, Parthapratim (1998), “Foreign Portfolio Investment in Indian Equity Markets: Has the Economy Benefited?”, Economic and Political Weekly, 33 (11), pp: 589-598.
  • Poshakwale, Sunil and Chandra Thapa (2007), “Impact of Foreign Portfolio Investments on Market Comovements: Evidence from the Emerging Indian Stock Market”, Paper to be presented in the Emerging Market Group ESRC Seminar on International Equity Markets Comovements and Contagion 11 May 2007 Cass Business School, London.
  • Phylaktis, Kate and Fabiola Ravazzolo (2005), “Stock Prices and Exchange Rate Dynamics”, Journal of International Money and Finance, 24, pp: 1031-1053.
  • Anokye M. Adam and George Tweneboah (2008), “Foreign Direct Investment (FDI) and Stock market Development: Ghana Evidence”, MPRA Paper No. 11261, pp: 1-13.
  • Baker, Malcolm, C. Fritz Foley and Jeffrey Wurgler (2004), “The Stock Market and Investment: Evidence from FDI Flows”, NBER Working Paper Series, Working Paper 10559
  • Budden, Michael C., Robert F. Cope, Yu Hsing and Susan M. L. Zee (2010), “Stock Market Performance, the Exchange Rate, and the Brazilian Economy”, Research in Applied Economics, 2 (2), pp: 1-8.
  • Claessens, Stijn, Daniela Klingebiel, and Sergio L. Schmukler (2001), “FDI and Stock Market Development: Complements or Substitutes?”, The FDI Race: Who Gets the Prize? Is it Worth the Effort?, Conference: Washington D.C., October 3-4, 2002. http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=50F62C37FBAE88B82AC3B8CC399AB8B9?doi=10.1.1.203.1003&rep=rep1&type=pdf (Erişim: Mart 2017).
  • Dimitrova, Desislava (2005), “The Relationship between Exchange Rates and Stock Prices: Studied in a Multivariate Model”, Issues in Political Economy, 14, pp: 1-25.
  • Emsen, Ö. Selçuk ve M. Kemal Değer (2007), “İktisadi ve Siyasal Liberalizasyon ve Ekonomik Büyüme İlişkileri: Geçiş Ekonomileri Deneyimi”, Atatürk Üniversitesi İİBF Fakültesi Dergisi, 21 (2), ss: 161-195.
  • Gazioglu, Saziye (2011), “Emerging Markets and Volatility of Real Exchange Rates: The Turkish Case”,Topics in Middle Eastern and North African Economies, 3, pp: 1-21, http://ecommons.luc.edu/cgi/viewcontent.cgi?article=1027&context=meea (Erişim: Mart 2017).
  • Gujarati, Domador N., Basic Econometrics, Third Edition, Literatür Yayıncılık, 1995.
  • Horobet, Alexandra and Livia Ilie (2007), “Real Exchange Rates And Stock Prices: Insights Into The Competitiveness of Romanian Economy”, Studies in Business and Eceonomics, https://ideas.repec.org/a/blg/journl/y2007v2p30-40.html (Erişim: Mart 2017).

BIST, FOREIGN CAPITAL AND EXCHANGE RATE RELATIONS: 1988-2015

Year 2018, Volume: 19 Issue: 1, 244 - 258, 31.05.2018

Ömer Selçuk Emsen , Ensar Ağırman

Abstract

In this study, the Borsa Istanbul index, which reflects its reaction to short-term changes in the economy, has been transformed into real (RBIST) with the US dollar. RBIST with Real Exchange Rate (RER) as the short-run variables that either affect RBIST or affected by it, foreign direct investment (FDI) to GDP ratio (FDIY) and the ratio of portfolio investments to GDP (PIY) as both short and long-term indirect capital investments were taken into consideration in this study. This study which is on the relationship between these four variables covers the period from 1988 to 2015 and the data are taken on an annual basis. According to the results of the stationary survey, it was determined that while some of the series were stationary in the level and some of them were stationary in the first difference. According to the causality analysis with stationary series, one-way causal relations from RBIST to FDIY and RER to FDIY were obtained. According to this, it can be said that the real economy policies in Turkey have triggered direct foreign capital attraction and the stock market has attracted direct foreign capital as a leading indicator.

Keywords

Stock exchange Direct and indirect investments Real exchange rate

References

  • Jamil, Maheen and Naeem Ullah (2013), “Impact of Foreign Exchange Rate on Stock Prices”, IOSR Journal of Business and Management, 7 (3), pp: 45-51.
  • Malik, Ihtisham Abdul and Shehla Amjad, (2013), “Foreign Direct Investment and Stock Market Development in Pakistan”, Journal of International Trade Law and Policy, 12 (3), pp: 226-242.
  • Özdemir, Dilek, Özge Buzdağlı, Murat Akdağ ve Ö. Selçuk Emsen (2016), “Rusya Borsasının Petrol Fiyatlarına Bağımlılığı”, International Conference on Economics Finance and Banking, Kaposvar-Macaristan, 29-31 August 2016, ss: 632-640.
  • Paramati, Sudharshan Reddy, Mallesh Ummalla and Nicholas Apergis (2016), “The Effect of Foreign Direct Investment and Stock Market Growth on Clean Energy Use Across A Panel of Emerging Market Economies”, Energy Economics, 56, pp: 29-41.
  • Pal, Parthapratim (1998), “Foreign Portfolio Investment in Indian Equity Markets: Has the Economy Benefited?”, Economic and Political Weekly, 33 (11), pp: 589-598.
  • Poshakwale, Sunil and Chandra Thapa (2007), “Impact of Foreign Portfolio Investments on Market Comovements: Evidence from the Emerging Indian Stock Market”, Paper to be presented in the Emerging Market Group ESRC Seminar on International Equity Markets Comovements and Contagion 11 May 2007 Cass Business School, London.
  • Phylaktis, Kate and Fabiola Ravazzolo (2005), “Stock Prices and Exchange Rate Dynamics”, Journal of International Money and Finance, 24, pp: 1031-1053.
  • Anokye M. Adam and George Tweneboah (2008), “Foreign Direct Investment (FDI) and Stock market Development: Ghana Evidence”, MPRA Paper No. 11261, pp: 1-13.
  • Baker, Malcolm, C. Fritz Foley and Jeffrey Wurgler (2004), “The Stock Market and Investment: Evidence from FDI Flows”, NBER Working Paper Series, Working Paper 10559
  • Budden, Michael C., Robert F. Cope, Yu Hsing and Susan M. L. Zee (2010), “Stock Market Performance, the Exchange Rate, and the Brazilian Economy”, Research in Applied Economics, 2 (2), pp: 1-8.
  • Claessens, Stijn, Daniela Klingebiel, and Sergio L. Schmukler (2001), “FDI and Stock Market Development: Complements or Substitutes?”, The FDI Race: Who Gets the Prize? Is it Worth the Effort?, Conference: Washington D.C., October 3-4, 2002. http://citeseerx.ist.psu.edu/viewdoc/download;jsessionid=50F62C37FBAE88B82AC3B8CC399AB8B9?doi=10.1.1.203.1003&rep=rep1&type=pdf (Erişim: Mart 2017).
  • Dimitrova, Desislava (2005), “The Relationship between Exchange Rates and Stock Prices: Studied in a Multivariate Model”, Issues in Political Economy, 14, pp: 1-25.
  • Emsen, Ö. Selçuk ve M. Kemal Değer (2007), “İktisadi ve Siyasal Liberalizasyon ve Ekonomik Büyüme İlişkileri: Geçiş Ekonomileri Deneyimi”, Atatürk Üniversitesi İİBF Fakültesi Dergisi, 21 (2), ss: 161-195.
  • Gazioglu, Saziye (2011), “Emerging Markets and Volatility of Real Exchange Rates: The Turkish Case”,Topics in Middle Eastern and North African Economies, 3, pp: 1-21, http://ecommons.luc.edu/cgi/viewcontent.cgi?article=1027&context=meea (Erişim: Mart 2017).
  • Gujarati, Domador N., Basic Econometrics, Third Edition, Literatür Yayıncılık, 1995.
  • Horobet, Alexandra and Livia Ilie (2007), “Real Exchange Rates And Stock Prices: Insights Into The Competitiveness of Romanian Economy”, Studies in Business and Eceonomics, https://ideas.repec.org/a/blg/journl/y2007v2p30-40.html (Erişim: Mart 2017).
There are 16 citations in total.

Details

Primary Language English
Journal Section Makaleler
Authors

Ömer Selçuk Emsen

Ensar Ağırman

Publication Date May 31, 2018
Submission Date February 6, 2018
Published in Issue Year 2018 Volume: 19 Issue: 1

Cite

APA Emsen, Ö. S., & Ağırman, E. (2018). BIST, FOREIGN CAPITAL AND EXCHANGE RATE RELATIONS: 1988-2015. Cumhuriyet Üniversitesi İktisadi Ve İdari Bilimler Dergisi, 19(1), 244-258.
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