The Relationship Between Financial Deepening and Business Cycles Volatility: Turkey Case

Muhammed Hasan YÃœCEL

Fiscaoeconomia, 2021, issue 2

Abstract: The effect of financial deepening on macroeconomic indicators is a subject that has taken a large place in the literature. This relationship is also important for those who run the economy. In this study, the relationship between financial deepening and the volatility of business cycles is analyzed with annual frequency data covering the years 1960-2019. In the study using VAR analysis, financial deepening is calculated also the share of the broad money supply in nominal GDP. The volatility of business cycles is included in the analysis by calculating as the moving average of the standard errors of the real GDP data. As a result of the VAR analysis, it has been determined that there is a transfer from financial deepening to the volatility of business cycles. In the study, in which Granger Causality analysis was carried out, it was determined that financial deepening is the cause of business cycle volatility, but business cycle volatility is not the cause of financial deepening. Besides, according to the results of the Johansen Cointegration test, it was found that the two variables are co-integrated in the long term, that is, they act together.

Keywords: Financial Deepening; Business Cycles; VAR (search for similar items in EconPapers)
JEL-codes: C32 C58 E32 E51 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:fis:journl:210212

DOI: 10.25295/fsecon.875648

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