Transmission mechanisms of financial stress into economic activity in Turkey

Polat O., ÖZKAN İ.

JOURNAL OF POLICY MODELING, vol.41, no.2, pp.395-415, 2019 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 41 Issue: 2
  • Publication Date: 2019
  • Doi Number: 10.1016/j.jpolmod.2019.02.010
  • Journal Name: JOURNAL OF POLICY MODELING
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.395-415
  • Hacettepe University Affiliated: Yes

Abstract

Measuring, analyzing and understanding systemic risk in financial system have become very important in the light of the recent global crisis. In this study, we follow Hollo, Kremer, and Lo Duca (2012) and evaluate systemic stress of financial system of Turkey with a high frequency (daily) financial stress index which consists of daily 13 financial market indicators. Dynamics of the financial stress index indicate that the index creates proper signals to the well-known financial stress events. The dynamic interaction between financial stress and real economic activity is investigated with application of structural VAR (SVAR) model. Results of the study suggest that deterioration of financial conditions impacts real economic activity significantly and adversely. (C) 2019 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.