Foreign Debt and Exchange Relations: Examinations on Turkey for the Period Between 1998-2021

Abstract

The favor of domestic and foreign elements is an important factor in the rise of the stock market index, and in this context, it is expected that foreign capital coming to the country will play a role in increasing the stock market. Foreign capital investments, which come to the stock market in particular and to the country in general for investment purposes, lead to the concept of debt burden after a while and may cause that country to be considered risky. Problems in foreign debt and its solvency make the country risky, and when such a situation arises, it is possible that the country's stock market will be adversely affected. In other words, the hypothesis that foreign capital inflows affect the stock market positively up to a certain level and that it will affect the stock market negatively after a certain level is exceeded has been the subject of examination in the Turkish economy. For the period between 1998:1Q-2021:4Q, stock market and debt data were subjected to time series analysis. Since the series were stationary at the first difference, FMOLS regression analyzes were performed in order to clearly reveal the relationships between the variables considered. As a result of the analysis, it was found that the stock market index was positively affected by the increases in debt up to a certain level; However, when a certain debt threshold level is exceeded, it has been determined that debt negatively affects the stock market.