Business Management Dynamics

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ISSN: 2047-7031

bmd Business and Management Dynamics bmd
ISSN: 2047-7031  
Volume  3   Issue 7  2014  
Article Abstract
Testing for cointegration and causality between sectoral indices and euro exchange rate in Turkey
Keywords:  Euro, exchange rate, cointegration, causality, ISE indices
Assoc. Prof. Dr. Ayhan Kapusuzoglu , Assist. Prof. Dr. Goknur Buyukkara and Res. Assist. Aslihan Tasdemir
In this study, the relation between the foreign exchange rate (Euro) in Turkey and 22 indices in Istanbul Stock Exchange (ISE) as well as the direction of this relation are analyzed with econometric techniques. The study is carried out for the period between 2002:01 and 2010:01. According to the study, it is detected with Johansen cointegration test that there is a cointegration relation, in other words a long-term relation between Euro and XKMYA, XSIN, XHIZ, XILTM and XULAS indices. A Granger causality test is carried out on indices with which Euro is found to have a cointegration relation and according to this test, all indices have unidirectional causality relations with Euro and that these relations are all from respective indices to Euro. In the light of obtained findings, we can say that it is possible for financial decision makers to predict changes to happen in Euro by following the indices with which Euro is found to have long-term causality relations.
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