Time-varying propagations between oil market shocks and a stock market: Evidence from Turkey

Abstract

We use a Bayesian time-varying parameter vector autoregression (TVP-VAR) model to examine the time-varying transmission mechanisms between structural oil price shocks and Borsa Istanbul, Turkey's stock market (BIST). Our data span the period February 1988 to December 2018, and include monthly West Texas Intermediate (WTI) spot crude oil prices, world crude oil production data, a measure of global real economic activity (the Kilian Index), and BIST data. Accordingly, we contribute to the literature by using a novel approach to estimate the time-varying propagations between oil-specific shocks and financial activity in Turkey. Our results are in line with those of related studies, thus verifying the consistency of the TVP-VAR model in capturing the time-varying nature of oil price shocks.

Keywords

• E44
• G10
• Q43