Causality between stock price and GDP in Turkey: An ARDL Bounds Testing Approach
The study investigates the dynamic relationship between stock prices and GDP in Turkey using quarterly data from 1989Q2-2014Q2. The study investigated the interrelationship between the variables via auto regressive distributive lag (ARDL) framework and ECM to analyse the existence of a long-run equi...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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Romanian National Institute of Statistics
2016-12-01
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| Series: | Revista Română de Statistică |
| Subjects: | |
| Online Access: | http://www.revistadestatistica.ro/wp-content/uploads/2016/12/RRS4_2016_A1.pdf |
| Summary: | The study investigates the dynamic relationship between stock prices and GDP in Turkey using quarterly data from 1989Q2-2014Q2. The study investigated the interrelationship between the variables via auto regressive distributive lag (ARDL) framework and ECM to analyse the existence of a long-run equilibrium relationship between gross domestic product and stock prices. The results provide strong evidence that both the stock prices and GDP are strongly cointegrated in the long-run. The empirical estimation indicated a significantly positive relationship between GDP and stock prices. The robustness of the ARDL model was confirmed by using Johansen and Juselius’s cointegration test (1990). The Granger causality test results indicate a long-run bidirectional causality between stock prices and GDP, and also a uni-directional causality from GDP to stock prices in the short-run. Both the stock prices and the economic growth are directly linked with each other. The reliability and validity of our estimations are confirmed by the diagnostics and the CUSUM test. |
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| ISSN: | 1018-046X 1844-7694 |