Macroeconomic Impact on Stock Indices: Turkey & Russia

Abstract

Since stock market is a high volatility market, they are affected by various variables. In this study, we aimed to investigate the relationship between the stock price index and consumer price index, interest rate and industrial production index for the stock markets of Russia and Turkey for the quarter period of 2000Q1-2021Q4. In this direction, ARDL model is used and the results of the paper show that there is a long-run relationship between stock markets and macroeconomic variables for both Russia and Turkey. When the long-run coefficients are analyzed, it is found that there is a long-run relationship between the Russian stock price index and the interest rate and the industrial production index, while there is no relationship with the consumer price index. In the short-run relationships, statistically significant results are produced since the error correction coefficient (-0.7900) is negative. According to the results of Turkey's long-run coefficients, there is a long-run relationship between the stock price index and the consumer price index, while there is no relationship between the interest rate and the industrial production index. As for the short-run relationship, the coefficient of ECM (-1.1669) is negative and statistically significant and there is a short-run relationship between Turkey's stock price index and interest rates. The findings show that the stock price index for both Russia and Turkey is affected by macroeconomic variables in the short and long run. In other words, macroeconomic variables should not be ignored while making long-term forecasts for stock markets.