Causality Relationship Between Economic, Financial, Political Risk and Growth: The Case of Turkey

Esra Soyu Yıldırım (), Cuma Demirtaş and Munise Ilıkkan Özgür
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Esra Soyu Yıldırım: Aksaray Üniversitesi, Sosyal Bilimler Meslek Yüksek Okulu, Aksaray, Türkiye
Cuma Demirtaş: Aksaray Üniversitesi, İktisadi ve İdari Bilimler Fakültesi İktisat Bölümü, Aksaray , Türkiye
Munise Ilıkkan Özgür: Aksaray Üniversitesi, İktisadi ve İdari Bilimler Fakültesi İktisat Bölümü, Aksaray , Türkiye

Journal of Economic Policy Researches, 2022, vol. 9, issue 1, 165-186

Abstract: This study aims to examine the causality relationship between Turkey’s economic, financial and political risk ratios and growth. Toda-Yamamoto causality, Bootstrap Toda-Yamamoto causality, and time-varying symmetric and asymmetric causality tests were used to examine the relationship between the risk ratios and growth between 2000- 2020. The findings show that (i) The Toda-Yamamoto causality test shows a causal relationship between financial risk and growth, economic risk and financial risk, and economic risk and political risk. (ii) The Bootstrap Toda-Yamamoto causality test revealed a causal relationship between financial risk and growth. The Bootstrap Toda-Yamamoto, asymmetric causality test, showed that a positive shock in financial risk causes a positive shock in growth, a negative shock in financial risk causes a negative shock in growth, and a negative shock in political risk causes a positive shock in growth. (iii) The time-varying relationship symmetric causality tests allowed for detecting causality between economic risk and growth, financial risk and growth, and political risk and growth. The time-varying relationship asymmetric causality tests revealed that a negative shock in economic risk caused a positive shock in growth; a positive shock in economic risk caused a negative shock in growth; a negative shock in financial risk caused a positive shock in growth and demonstrated the effects of the positive shock in financial risk as a negative shock in growth. However, a negative shock in growth was only observed when there was a positive shock in political risk.

Keywords: Economic risk; Financial risk; Political risk; Economic growth; Causality analysis JEL Classification : F34; E43; G32 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ist:iujepr:v:9:y:2022:i:1:p:165-186

DOI: 10.26650/JEPR1016857

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