Do confidence indicators have an impact on macro-financial indicators? An analysis of the financial service and real sector confidence indexes: evidence from Turkey

Abstract

The primary aim of this study is to analyze the impact of financial services and real sector confidence indexes on some macroeconomic and financial indicators such as industrial production, inflation, stock market index, foreign exchange rates and interest rates in Turkey for the period from May 2012 to May 2019. In this study, the unit root properties of these series are tested by using the Narayan and Popp (2010) unit root test with two structural breaks and the Enders and Lee (2012) Fourier ADF unit root test with multiple structural breaks. We investigate the causal link between confidence indicators and macro-financial variables using the Fourier Toda Yamamoto causality test proposed by Nazlioglu et al. (2016). The results suggest a strong link between financial services and real sector confidence indexes on macro-financial indicators such as stock market index and inflation, supporting the evidence of the short-run impact of confidence indexes on these variables.