Causality Relationship Between Economic, Financial, Political Risk and Growth: The Case of TurkeyEsra Soyu Yıldırım, Cuma Demirtaş, Munise Ilıkkan Özgür
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.
Ekonomik, Finansal ve Politik Risk ile Büyüme Arasındaki Nedensellik İlişkisi: Türkiye ÖrneğiEsra Soyu Yıldırım, Cuma Demirtaş, Munise Ilıkkan Özgür
Bu çalışmanın amacı, Türkiye’nin ekonomik, finansal ve politik risk oranları ile büyüme arasındaki nedensellik ilişkisini incelemektir. Çalışmada 2000:01– 2020:06 döneminde söz konusu risk oranları ile büyüme arasındaki ilişkiyi incelemek için Toda-Yamamoto nedensellik testi, Hatemi-J tarafından geliştirilen Bootstrap Toda-Yamamoto nedensellik testi ve zamanla değişen simetrik ve asimetrik nedensellik testleri kullanılmıştır. Elde edilen bulgular şu şekildedir: (i) Toda-Yamamoto nedensellik testine göre; finansal riskten büyümeye, ekonomik riskten finansal riske ve ekonomik riskten politik riske doğru nedensellik ilişkisi bulunmaktadır. (ii) Bootstrap Toda-Yamamoto nedensellik testine göre finansal riskten büyümeye doğru nedensellik ilişkisi vardır. Bootstrap Toda-Yamamoto asimetrik nedensellik testine göre; finansal riskteki pozitif şok büyümede pozitif şoka, finansal riskteki negatif şok büyümede negatif şoka ve politik riskteki negatif şok ise büyümede pozitif şoka yol açmaktadır. (iii) Zamanla değişen simetrik nedensellik testine göre nedensellik ilişkisinin olduğu dönemler; ekonomik riskten büyümeye doğru, finansal riskten büyümeye doğru ve politik riskten büyümeye doğru tespit edilmiştir. Zamanla değişen asimetrik nedensellik testine göre nedensellik ilişkisinin olduğu dönemler; ekonomik riskteki negatif şokun büyümedeki pozitif şoka ekonomik riskteki pozitif şokun büyümedeki negatif şoka; finansal riskteki negatif şokun büyümedeki pozitif şoka, finansal riskteki pozitif şokun büyümedeki negatif şoka etkilerini göstermektedir. Ancak söz konusu dönemde sadece politik riskteki pozitif şokun büyümede negatif şoka neden olduğu dönem görülmektedir.
Economic growth continues to be one of the areas that researchers focus on because small increases in the growth rates of countries can create significant effects that can change their welfare and living standards. Questions such as “why are some countries developing more rapidly than others?”, “Why do different countries develop differently?” has always been on the agenda of economists since different national growth performances have caused significant differences in indicators such as per capita income and living standards (Acemoğlu, 2012).
Das and Loxley (2015), Berber and Artan (2004), and Barro (1995) reveal the relationship between inflation and growth; Kutlu and Yurttagüler (2016) and Pattillo et al. (2011) indicate a relationship between foreign debt and economic growth; Kenourgios and Samitas (2007) and Dudian and Popa (2013) identified a relationship between credit and economic growth; Caporale et al., (2009), Calderon and Liu (2003), Christopoulos and Tsionas (2004), and Soytaş and Küçükkaya (2011) examine the relationship between financial development and economic growth. In addition, studies such as Feng (2001), Chen and Feng (1996), Tang and Abosedra (2014), Çela and Hysa (2021), and Pasha (2020) have investigated the relationship between political indicators and growth. These studies narrowly analyze the effect of economic, financial, and political variables on economic growth based on a single subcomponent. However, considering that these risk variables have more than one subcomponent, it is essential to examine the effects of these variables on economic growth more comprehensively. In this study, the effect of economic, financial, and political risk ratios on economic growth is examined for Turkey during the period of 2000:01-2020:06. For this purpose, the following tests were used: the Toda-Yamamoto causality test, the Bootstrap Toda-Yamamoto causality test developed by Hatemi-J, and the time-varying symmetric and asymmetrical causality tests of the Hatemi-J test, which examine the causality relationship in terms of sub-periods.
According to the findings, The Toda-Yamamoto causality test shows a causal relationship between the financial risk variable and economic growth, between the economic risk variable and the financial risk variable, and between the economic risk variable and the political risk variable. According to the Bootstrap Toda-Yamamoto causality test findings, there is a causality relationship between the financial risk variable and economic growth. According to the Bootstrap Toda-Yamamoto asymmetric causality test findings, it is seen that economic growth reacts positively to the positive shock arising from the financial risk variable, while economic growth responds negatively to an adverse shock. A negative shock in the political risk variable causes a positive shock on economic growth. According to the time-varying symmetric causality test findings, in general terms, the periods in which there is a causal relationship between the economic risk variable and economic growth are the following: in the periods 2003:12-2012:02, 2014:06-2017:05, 2018:01-2020:06; economic growth is affected by the financial risk variable in the period of 2000:02-2011:05 and by the political risk variable in the period of 2002:01-2018:05. According to the time-varying asymmetric causality test findings, it is seen that negative shocks in the economic risk variable affect economic growth positively in the period of 2010:05-2020:06, and the positive shocks in the economic risk variable affect economic growth negatively in the period of 2013:11-2019:04. These shocks positively affect the financial risk variable in the period 2010:05-2020:06, while having a negative effect in the period of 2011:02-2018:07. The effects of shocks in economic and financial risk variables on economic growth occurred in similar periods. This situation strengthens the theoretical view that economic and financial risks support each other. Even though the political risk variable caused no positive shock to economic growth in the said period, there was an increase in the political risk ratio in the 2011:05-2017:01 period, which negatively affected the economic growth. When the effect of risk types on economic growth is evaluated generally, improvement or deterioration in all these risk types in Turkey has positive or negative effects on economic growth. In addition, in recent years, the effect of economic and financial risks has been stronger than the effect of political risk on economic growth. In the light of this information, it can be said that it is necessary to take policies and measures to reduce economic and financial risks. In this context, there has been a deterioration in economic growth in Turkey recently, especially after 2012; Indicators such as GDP per capita, exchange rate, budget balance, inflation rate, current account balance, and external debts show that remedial measures should be taken.