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Asymmetric exchange rate pass-through and sectoral stock price indices: Evidence from Turkey

Muhammed Benli (), Sedat Durmuskaya () and Gokberk Bayramoglu ()
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Muhammed Benli: Bilecik Seyh Edebali University
Sedat Durmuskaya: Sakarya University
Gokberk Bayramoglu: Sakarya University

International Journal of Business and Management, 2019, vol. 7, issue 1, 25-47

Abstract: In this study, we empirically investigate the impact of exchange rate changes on sectoral stock price indices in Turkey in a multivariate model controlling for consumer price index, industrial production index and money supply. For this purpose, we adopt nonlinear autoregressive distributed lags (NARDL) model developed by Shin et al. (2014). The empirical results indicate an incomplete pass-through effect of exchange rate to stock prices both in the long- and short-run. The results also support short-run asymmetry for all sectors considered in this study, except for ISE Information Services. Regarding the effect of CPI, IPI and M2, our findings indicate that, for majority of industries, consumer price index is significantly negatively correlated with stock prices in the long-run whereas the long-run impact of money supply and industrial production index on stock prices is positive.

Keywords: Nonlinear ARDL; Nonlinearity; Multivariate model; Cointegration; Stock market (search for similar items in EconPapers)
JEL-codes: F31 C10 O16 (search for similar items in EconPapers)
Date: 2019
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