Stock Market Inclusion and İts Connection with Economic Activity in Turkey

This study explores the relationship between stock market inclusion and economic activity (liveliness) in Turkey by taking advantage of the recent contributions in causality theory. Stock market inclusion is represented by the seasonally adjusted real stock market trade volume per capita (TV) and economic activity by the seasonally adjusted real gross domestic product per capita (GDP). We use quarterly series covering the period 2003:1-2020:2 and employ asymmetric bootstrap and asymmetric Fourier bootstrap causality testing procedures to obtain robust parameter estimates. Both procedures adopt a nonlinear methodology but the latter is distinguished from the first in the sense that it follows a Fourier series approximation which allows for structural breaks of unknown number, form, and point. Empirical findings suggest that the Fourier-type asymmetric bootstrap causality procedure, thanks to its trigonometric components, captures two unidirectional (one-way) causalities; one running from the positive components of TV to those of GDP and the other running from the negative components of TV to those of GDP, but not vice versa. These findings verified a strong influence on GDP of the alterations i.e. positive and negative shocks in stock market conditions.