**3.10 Politically tranquil periods with significant depreciation of Turkish Lira and rise in interest rates**

The findings of this paper are quite important to understand how an emerging country can deal or should deal with a possible financial shock/crisis. According to this, the first and maybe the most important outcome of the study was that although an emerging country is in a politically stressed situation, this stress's impact on the money markets change according to the dynamics of the situation. While a fully domestic development may cause financial market to separate from the rest of the world or the countries that is normally strongly integrated with, another negative development that occurs due to foreign diplomatic issues might have an opposite impact. Therefore, policy makers should primarily determine and examine the reasons of a political tension to foresee the possible consequences in the financial markets. For the Turkish case, this study clearly showed that while during the tranquil periods Turkey is significantly integrated with both the US and the emerging markets and any shocks from those markets significantly affect both interest rates and the exchange rates, some political developments, especially army and USA related ones, cause Turkey to negatively separate from those markets. Secondly, this study quantitatively proved that the shocks that are originated from the group of emerging markets significantly affect other emerging markets in very short term while shocks from a developed country, USA in our case, show its impacts in a longer term. In this case, policy makers should be aware of the danger that instability of an emerging country may have a significant impact on their financial markets very quickly. In other words, while an emerging country has strong and healthy dynamics, a negative shock from other emerging countries may also negatively and significantly affect that specific country in the first or second day. Therefore, policy makers should be aware of the time periods while taking

*External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil…*

*DOI: http://dx.doi.org/10.5772/intechopen.89931*

precautions to the negative developments in other countries.

**Appendix**

**91**

See **Tables 1**–**9**.

**Vector autoregression estimates**

As a result, the findings of this chapter clearly prove that an emerging country is open to financial shocks even if the country is politically tranquil due to significant effects of the group of emerging markets and the USA. In case of a political stress, on the other hand, the situation becomes more complicated as some of the political crisis cause financial markets to react negatively internal news instead of external shocks. Therefore, in emerging countries, investors and policy makers should always consider political stability of the country, dynamics of the political tension and the risk level of the group of emerging markets in the short term and the changes in the short-term interest rates of USA in the rather longer term.

**USD\_TRY USA TR MSCI\_EMERGING**

(0.02242) (0.00351) (0.07595) (0.30998) [55.2812] [0.31261] [1.96770] [0.75714]

(0.03463) (0.00541) (0.11729) (0.47870) [12.3698] [0.33595] [3.70736] [0.58382]

(0.02251) (0.00352) (0.07624) (0.31118) [8.37756] [1.02591] [3.21119] [1.52566]

USD\_TRY(1) 1.239555 0.001096 0.149446 0.234697

USD\_TRY(2) 0.428334 0.001819 0.434834 0.279474

USD\_TRY(3) 0.188575 0.003611 0.244834 0.474752

According to **Figure 4**, although we do not identify any political crisis, Turkish Lira depreciates and short-term interest rate rises significantly during the fourth quarter of 2011, the first quarter of 2017 and the fourth quarter of 2017. To be able to understand the reasons of these changes, we run analysis specifically for these periods. The results reveal that the changes on the short-term interest rates and the exchange rate occur as a respond to the shocks from emerging markets in the fourth quarter of 2011 and the fourth quarter of 2017 while the depreciation of the Turkish Lira and the increase in interest rates in the first quarter of 2017 occur as a strong respond to the shocks coming from the US short-term interest rates.

## **4. Conclusion**

This chapter analyses the reaction of short-term interest rate and exchange rate of Turkey to the external shocks and how this reaction changes according to domestic political tension. For this purpose, the reaction of interest rates and exchange rates to the American interest rate volatility and emerging market risk factor is tested for the period of 2011–2019. During that period, we identified eight major politically stressed periods that have significant negative impact on Turkish money markets.

The primary result that we get from the VAR test for the period of 2011–2019 is that Turkish short-term interest rates and the USD/TRY exchange rate are not significantly affected by the US short-term interest rates in the short run. However, Turkish short-term interest rates significantly respond to the US short-term interest rates after 10 days. On the other hand, emerging market risk premia seems to be much more important factor on Turkish short-term interest rates and the exchange rate as during the 2011–2019 period, Turkish short-term interest rates and the exchange rate significantly respond to the shocks coming from emerging markets in the first 2 days.

If we sum up the impacts of each political stress period on the impacts of external factors on the domestic interest rates and the exchange rate, we get a blurred picture as it is difficult to generalize the impacts of political stresses. According to that, while the political stress #1 and the political stress #7 do not change how external factors affect the domestic interest rate and the exchange rate as those keep significantly responding to emerging market risk premia and the short-term US interest, during the political stresses #2, #3, #4, #5, and #8, neither exchange rates nor interest rates respond to any shocks from the US interest rates and the emerging markets. Therefore, we suggest that while the early retirement request of commanders of Turkish Army and military coup attempt did not create strong enough impact to change the pricing structure of Turkish assets and/or perception of the investors; the Gezi Park incidents, the operation of FETO terror organization to the government authorities, 2014 presidential election, 7th June 2015 general elections and afterward, and the announcement of new cabinet after 2018 elections and the Branson incident were strong enough to change the pricing priorities of investors on Turkish risky assets. Following those developments, domestic news seem to have more significant effect on the short-term interest rates and the exchange rate compared to the external factors. Only during the political stress period #6, shooting down of Russian plane, created mixed impact on the external factors as during this period the Turkish currency significantly responded to the US short-term interest rates in shorter period while it kept significantly responding to the emerging market risk premia.

#### *External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil… DOI: http://dx.doi.org/10.5772/intechopen.89931*

The findings of this paper are quite important to understand how an emerging country can deal or should deal with a possible financial shock/crisis. According to this, the first and maybe the most important outcome of the study was that although an emerging country is in a politically stressed situation, this stress's impact on the money markets change according to the dynamics of the situation. While a fully domestic development may cause financial market to separate from the rest of the world or the countries that is normally strongly integrated with, another negative development that occurs due to foreign diplomatic issues might have an opposite impact. Therefore, policy makers should primarily determine and examine the reasons of a political tension to foresee the possible consequences in the financial markets. For the Turkish case, this study clearly showed that while during the tranquil periods Turkey is significantly integrated with both the US and the emerging markets and any shocks from those markets significantly affect both interest rates and the exchange rates, some political developments, especially army and USA related ones, cause Turkey to negatively separate from those markets. Secondly, this study quantitatively proved that the shocks that are originated from the group of emerging markets significantly affect other emerging markets in very short term while shocks from a developed country, USA in our case, show its impacts in a longer term. In this case, policy makers should be aware of the danger that instability of an emerging country may have a significant impact on their financial markets very quickly. In other words, while an emerging country has strong and healthy dynamics, a negative shock from other emerging countries may also negatively and significantly affect that specific country in the first or second day. Therefore, policy makers should be aware of the time periods while taking precautions to the negative developments in other countries.

As a result, the findings of this chapter clearly prove that an emerging country is open to financial shocks even if the country is politically tranquil due to significant effects of the group of emerging markets and the USA. In case of a political stress, on the other hand, the situation becomes more complicated as some of the political crisis cause financial markets to react negatively internal news instead of external shocks. Therefore, in emerging countries, investors and policy makers should always consider political stability of the country, dynamics of the political tension and the risk level of the group of emerging markets in the short term and the changes in the short-term interest rates of USA in the rather longer term.

## **Appendix**

**3.10 Politically tranquil periods with significant depreciation of Turkish Lira**

respond to the shocks coming from the US short-term interest rates.

According to **Figure 4**, although we do not identify any political crisis, Turkish Lira depreciates and short-term interest rate rises significantly during the fourth quarter of 2011, the first quarter of 2017 and the fourth quarter of 2017. To be able to understand the reasons of these changes, we run analysis specifically for these periods. The results reveal that the changes on the short-term interest rates and the exchange rate occur as a respond to the shocks from emerging markets in the fourth quarter of 2011 and the fourth quarter of 2017 while the depreciation of the Turkish Lira and the increase in interest rates in the first quarter of 2017 occur as a strong

This chapter analyses the reaction of short-term interest rate and exchange rate

The primary result that we get from the VAR test for the period of 2011–2019 is

that Turkish short-term interest rates and the USD/TRY exchange rate are not significantly affected by the US short-term interest rates in the short run. However, Turkish short-term interest rates significantly respond to the US short-term interest rates after 10 days. On the other hand, emerging market risk premia seems to be much more important factor on Turkish short-term interest rates and the exchange rate as during the 2011–2019 period, Turkish short-term interest rates and the exchange rate significantly respond to the shocks coming from emerging markets in

If we sum up the impacts of each political stress period on the impacts of external factors on the domestic interest rates and the exchange rate, we get a blurred picture as it is difficult to generalize the impacts of political stresses. According to that, while the political stress #1 and the political stress #7 do not change how external factors affect the domestic interest rate and the exchange rate as those keep significantly responding to emerging market risk premia and the short-term US interest, during the political stresses #2, #3, #4, #5, and #8, neither exchange rates nor interest rates respond to any shocks from the US interest rates and the emerging markets. Therefore, we suggest that while the early retirement request of commanders of Turkish Army and military coup attempt did not create strong enough impact to change the pricing structure of Turkish assets and/or perception of the investors; the Gezi Park incidents, the operation of FETO terror organization to the government authorities, 2014 presidential election, 7th June 2015 general elections and afterward, and the announcement of new cabinet after 2018 elections and the Branson incident were strong enough to change the pricing priorities of investors on Turkish risky assets. Following those developments, domestic news seem to have more significant effect on the short-term interest rates and the exchange rate compared to the external factors. Only during the political stress period #6, shooting down of Russian plane, created mixed impact on the external factors as during this period the Turkish currency significantly responded to the US short-term interest rates in shorter period while it kept significantly

responding to the emerging market risk premia.

of Turkey to the external shocks and how this reaction changes according to domestic political tension. For this purpose, the reaction of interest rates and exchange rates to the American interest rate volatility and emerging market risk factor is tested for the period of 2011–2019. During that period, we identified eight major politically stressed periods that have significant negative impact on Turkish

**and rise in interest rates**

*Financial Crises - A Selection of Readings*

**4. Conclusion**

money markets.

the first 2 days.

**90**


See **Tables 1**–**9**.


**Vector autoregression estimates**

*DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 7/29/2011–8/12/2011. Included observations: 11.*

**Table 2.**

**93**

*Standard errors in () & t-statistics in [].*

*VAR estimates result for political stress #1.*

**USD\_TRY TR USA MSCI\_EMERGING**

(0.62071) (3.47853) (0.29360) (41.8594) [1.40573] [2.54689] [0.20552] [0.74411]

(0.60804) (3.40756) (0.28761) (41.0055) [0.50668] [4.10543] [0.36061] [2.24788]

(0.04691) (0.26291) (0.02219) (3.16377) [0.44939] [3.37956] [0.26218] [1.38084]

(0.05263) (0.29492) (0.02489) (3.54897) [2.42989] [0.27483] [1.18308] [3.63160]

(1.13015) (6.33354) (0.53457) (76.2157) [1.20382] [0.38706] [0.88814] [0.61579]

(1.41483) (7.92892) (0.66922) (95.4140) [0.95935] [3.47437] [0.36987] [0.34396]

(0.00716) (0.04014) (0.00339) (0.48306) [1.83430] [2.24372] [0.38187] [0.62231]

(0.00847) (0.04748) (0.00401) (0.57139) [0.26393] [3.00808] [0.68888] [0.09002]

(2.30845) (12.9369) (1.09191) (155.678) [0.75964] [3.20396] [0.21959] [2.51190]

USD\_TRY(1) 0.872545 8.859426 0.060340 31.14791

*External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil…*

USD\_TRY(2) 0.308087 13.98951 0.103715 92.17556

TR(1) 0.021083 0.888519 0.005818 4.368654

TR(2) 0.127874 0.081052 0.029449 12.88844

USA(1) 1.360505 2.451433 0.474769 46.93249

USA(2) 1.357323 27.54796 0.247523 32.81856

MSCI\_EMERGING(1) 0.013139 0.090067 0.001294 0.300612

MSCI\_EMERGING(2) 0.002236 0.142830 0.002761 0.051437

C 1.753591 41.44923 0.239769 391.0476

R-squared 0.981377 0.991826 0.951979 0.986179 Adj. R-squared 0.906885 0.959132 0.759893 0.930895 Sum sq. resids 0.000261 0.008212 5.85E-05 1.189129 S.E. equation 0.011434 0.064077 0.005408 0.771080 F-statistic 13.17424 30.33649 4.956014 17.83851 Log likelihood 42.95073 23.99218 51.18588 3.372616 Akaike AIC 6.172859 2.725851 7.670159 2.249567 Schwarz SC 5.847309 2.400300 7.344609 2.575117 Mean dependent 1.741182 8.368442 0.272727 42.97664 SD dependent 0.037470 0.316965 0.011037 2.933228

*Sample (adjusted): 1/06/2011–12/31/2018.*

*Included observations: 2083 after adjustments.*

*Standard errors in () & t-statistics in [].*

#### **Table 1.**

*VAR estimates result for full period.*


### *External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil… DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 7/29/2011–8/12/2011.*

*Included observations: 11.*

*Standard errors in () & t-statistics in [].*

#### **Table 2.**

*VAR estimates result for political stress #1.*

**Vector autoregression estimates**

*Financial Crises - A Selection of Readings*

*Sample (adjusted): 1/06/2011–12/31/2018. Included observations: 2083 after adjustments. Standard errors in () & t-statistics in [].*

*VAR estimates result for full period.*

**Table 1.**

**92**

**USD\_TRY USA TR MSCI\_EMERGING**

(0.13915) (0.02176) (0.47131) (1.92359) [0.56743] [44.7690] [0.34987] [0.77157]

(0.19382) (0.03031) (0.65652) (2.67948) [1.00526] [6.25325] [0.74996] [0.16612]

(0.13949) (0.02181) (0.47246) (1.92829) [0.88032] [7.44312] [1.35705] [0.58973]

(0.00649) (0.00101) (0.02198) (0.08970) [2.87047] [1.74446] [53.5019] [0.03593]

(0.00993) (0.00155) (0.03362) (0.13723) [3.16940] [0.80626] [4.71967] [0.80864]

(0.00647) (0.00101) (0.02191) (0.08941) [1.83610] [0.44281] [1.03744] [1.25577]

(0.00164) (0.00026) (0.00556) (0.02268) [4.02779] [1.45922] [2.41343] [41.9154]

(0.00229) (0.00036) (0.00776) (0.03166) [3.84306] [0.17935] [2.53237] [1.06829]

(0.00165) (0.00026) (0.00558) (0.02277) [1.42275] [1.18279] [0.78721] [0.19864]

(0.01176) (0.00184) (0.03982) (0.16252) [0.14220] [0.37831] [2.62837] [3.26443]

USA(1) 0.078956 0.973994 0.164896 1.484175

USA(2) 0.194843 0.189506 0.492364 0.445107

USA(3) 0.122793 0.162329 0.641158 1.137173

TR(1) 0.018625 0.001770 1.175840 0.003223

TR(2) 0.031462 0.001251 0.158691 0.110968

TR(3) 0.011875 0.000448 0.022727 0.112278

MSCI\_EMERGING(1) 0.006609 0.000374 0.013413 0.950738

MSCI\_EMERGING(2) 0.008802 6.42E-05 0.019646 0.033825

MSCI\_EMERGING(3) 0.002344 0.000305 0.004392 0.004523

C 0.001672 0.000695 0.104660 0.530523

R-squared 0.998765 0.999927 0.999116 0.985729 Adj. R-squared 0.998758 0.999926 0.999111 0.985646 Sum sq. resids 2.957368 0.072297 33.92978 565.1823 S.E. equation 0.037798 0.005910 0.128028 0.522527 F-statistic 139543.2 2,358,791. 194978.8 11914.92 Log likelihood 3873.742 7739.029 1332.489 1597.100 Akaike AIC 3.706906 7.418175 1.266912 1.545943 Schwarz SC 3.671697 7.382966 1.231703 1.581152 Mean dependent 2.728274 0.738451 11.06632 40.88733 SD dependent 1.072606 0.689107 4.293795 4.361402


**Vector autoregression estimates**

*DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 12/17/2013–12/30/2013. Included observations: 10.*

**Table 4.**

**95**

*Standard errors in () & t-statistics in [].*

*VAR estimates result for political stress #3.*

**USD\_TRY TR USA MSCI\_EMERGING**

(1.02806) (3.21845) (0.17927) (6.53266) [0.24521] [1.52407] [0.55983] [0.54795]

(1.42700) (4.46736) (0.24884) (9.06764) [0.20656] [1.84401] [0.03066] [2.23747]

(0.15216) (0.47636) (0.02653) (0.96690) [0.71513] [0.33583] [0.95816] [1.21938]

(0.06720) (0.21036) (0.01172) (0.42699) [0.64507] [0.35042] [0.37162] [0.92960]

(5.69159) (17.8181) (0.99249) (36.1663) [0.76590] [0.38613] [1.23251] [0.22992]

(10.1715) (31.8428) (1.77369) (64.6331) [0.45262] [0.39346] [0.87816] [2.73191]

(0.07507) (0.23500) (0.01309) (0.47700) [0.56543] [1.19075] [0.97716] [2.57741]

(0.06557) (0.20527) (0.01143) (0.41664) [1.17394] [1.28292] [0.89786] [1.42913]

(2.80039) (8.76691) (0.48833) (17.7947) [0.18033] [1.63344] [0.75099] [3.60891]

USD\_TRY(1) 0.252091 4.905135 0.100362 3.579565

*External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil…*

USD\_TRY(2) 0.294757 8.237847 0.007630 20.28858

TR(1) 0.108817 0.159976 0.025424 1.179018

TR(2) 0.043346 0.073717 0.004355 0.396928

USA(1) 4.359186 6.880054 1.223262 8.315462

USA(2) 4.603798 12.52887 1.557584 176.5719

MSCI\_EMERGING(1) 0.042445 0.279831 0.012791 1.229423

MSCI\_EMERGING(2) 0.076973 0.263341 0.010266 0.595434

C 0.504984 14.32025 0.366730 64.21933

R-squared 0.944309 0.994128 0.799905 0.977004 Adj. R-squared 0.498785 0.947151 0.800856 0.793032 Sum sq. resids 0.000592 0.005804 1.80E05 0.023913 S.E. equation 0.024336 0.076186 0.004244 0.154638 F-statistic 2.119544 21.16193 0.499703 5.310618 Log likelihood 34.48162 23.06937 51.94686 15.99023 Akaike AIC 5.096325 2.813875 8.589371 1.398046 Schwarz SC 4.823998 2.541548 8.317045 1.125720 Mean dependent 2.093070 8.858114 0.249000 40.94500 SD dependent 0.034374 0.331400 0.003162 0.339910

*Sample: 5/28/2013–6/21/2013.*

*Included observations: 19.*

*Standard errors in () & t-statistics in [].*

#### **Table 3.**

*VAR estimates result for political stress #2.*


### *External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil… DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 12/17/2013–12/30/2013.*

*Included observations: 10.*

*Standard errors in () & t-statistics in [].*

#### **Table 4.**

*VAR estimates result for political stress #3.*

**Vector autoregression estimates**

*Financial Crises - A Selection of Readings*

*Sample: 5/28/2013–6/21/2013. Included observations: 19.*

**Table 3.**

**94**

*Standard errors in () & t-statistics in [].*

*VAR estimates result for political stress #2.*

**USD\_TRY TR USA MSCI\_EMERGING**

(0.35577) (3.63916) (0.07309) (17.9657) [2.93957] [0.42644] [1.12787] [0.92477]

(0.38266) (3.91418) (0.07862) (19.3234) [1.54909] [0.13846] [1.10506] [0.21053]

(0.03042) (0.31120) (0.00625) (1.53631) [0.00926] [2.82575] [2.47605] [0.66490]

(0.02836) (0.29005) (0.00583) (1.43189) [0.73162] [0.29527] [1.30335] [1.36988]

(1.23033) (12.5849) (0.25277) (62.1287) [1.54164] [1.45264] [0.96899] [0.31539]

(1.28545) (13.1487) (0.26409) (64.9120) [0.27361] [1.15167] [0.21017] [0.81496]

(0.00809) (0.08272) (0.00166) (0.40836) [0.74921] [0.84281] [1.72434] [1.30151]

(0.00942) (0.09636) (0.00194) (0.47571) [1.20785] [0.07558] [2.01978] [0.05101]

(0.88691) (9.07206) (0.18221) (44.7866) [0.30515] [0.94717] [0.52404] [1.52549]

USD\_TRY(1) 1.045822 1.551895 0.082439 16.61406

USD\_TRY(2) 0.592774 0.541974 0.086876 4.068066

TR(1) 0.000282 0.879367 0.015476 1.021491

TR(2) 0.020745 0.085642 0.007593 1.961514

USA(1) 1.896724 18.28130 0.244931 19.59458

USA(2) 0.351707 15.14300 0.055503 52.90086

MSCI\_EMERGING(1) 0.006059 0.069716 0.002865 0.531484

MSCI\_EMERGING(2) 0.011379 0.007283 0.003909 0.024268

C 0.270639 8.592797 0.095488 68.32132

R-squared 0.779097 0.964512 0.648236 0.870906 Adj. R-squared 0.602375 0.936121 0.366825 0.767630 Sum sq. resids 0.002105 0.220288 8.89E-05 5.368774 S.E. equation 0.014510 0.148421 0.002981 0.732719 F-statistic 4.408603 33.97284 2.303518 8.432841 Log likelihood 59.56320 15.38413 89.63188 14.95336 Akaike AIC 5.322442 0.672013 8.487566 2.521406 Schwarz SC 4.875076 0.224648 8.040200 2.968772 Mean dependent 1.884921 5.980695 0.271579 40.16632 SD dependent 0.023011 0.587241 0.003746 1.520014


**Vector autoregression estimates**

*DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 6/08/2015 8/25/2015. Included observations: 57.*

**Table 6.**

**97**

*Standard errors in () & t-statistics in [].*

*VAR estimates result for political stress #5.*

**USD\_TRY TR USA MSCI\_EMERGING**

(0.16209) (0.45042) (0.02559) (3.85036) [4.37278] [0.55429] [1.35656] [0.63427]

(0.16238) (0.45120) (0.02564) (3.85707) [0.75354] [0.09729] [0.97614] [0.42919]

(0.05723) (0.15902) (0.00903) (1.35938) [0.07697] [5.68205] [1.00429] [1.49625]

(0.05883) (0.16348) (0.00929) (1.39745) [1.09819] [0.71282] [0.16062] [0.48985]

(1.00376) (2.78919) (0.15847) (23.8431) [0.32801] [0.69633] [4.22288] [0.64231]

(1.01086) (2.80893) (0.15959) (24.0118) [0.95930] [0.03832] [1.40904] [1.02327]

(0.00657) (0.01826) (0.00104) (0.15607) [1.51989] [0.55900] [0.24527] [6.01475]

(0.00673) (0.01869) (0.00106) (0.15978) [1.43299] [1.03376] [1.41540] [0.88797]

(0.46135) (1.28196) (0.07283) (10.9587) [1.90886] [0.53073] [2.38512] [2.14956]

USD\_TRY(1) 0.708805 0.249663 0.034715 2.442156

*External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil…*

USD\_TRY(2) 0.122357 0.043897 0.025023 1.655415

TR(1) 0.004405 0.903572 0.009074 2.033973

TR(2) 0.064607 0.116529 0.001492 0.684540

USA(1) 0.329242 1.942183 0.669188 15.31464

USA(2) 0.969726 0.107627 0.224866 24.57049

MSCI\_EMERGING(1) 0.009986 0.010206 0.000254 0.938702

MSCI\_EMERGING(2) 0.009639 0.019322 0.001503 0.141877

C 0.880645 0.680372 0.173718 23.55633

R-squared 0.945737 0.897486 0.968769 0.962453 Adj. R-squared 0.936693 0.880401 0.963564 0.956195 Sum sq. resids 0.019811 0.152969 0.000494 11.17816 S.E. equation 0.020316 0.056452 0.003207 0.482575 F-statistic 104.5732 52.52882 186.1174 153.7995 Log likelihood 146.1108 87.85686 251.3305 34.45046 Akaike AIC 4.810905 2.766907 8.502823 1.524577 Schwarz SC 4.488318 2.444320 8.180236 1.847164 Mean dependent 2.743363 11.41014 0.297242 37.78491 SD dependent 0.080744 0.163236 0.016803 2.305703

*Sample: 7/31/2014–8/15/2014.*

*Included observations: 12.*

*Standard errors in () & t-statistics in [].*

#### **Table 5.**

*VAR estimates result for political stress #4.*


### *External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil… DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 6/08/2015 8/25/2015.*

*Included observations: 57.*

*Standard errors in () & t-statistics in [].*

#### **Table 6.**

*VAR estimates result for political stress #5.*

**Vector autoregression estimates**

*Financial Crises - A Selection of Readings*

*Sample: 7/31/2014–8/15/2014. Included observations: 12.*

**Table 5.**

**96**

*Standard errors in () & t-statistics in [].*

*VAR estimates result for political stress #4.*

**USD\_TRY TR USA MSCI\_EMERGING**

(0.53772) (8.59526) (0.07212) (28.5601) [0.96563] [0.60989] [0.25906] [0.44332]

(0.38776) (6.19818) (0.05201) (20.5951) [1.34546] [0.52988] [2.23911] [1.67053]

(0.02810) (0.44925) (0.00377) (1.49274) [1.18128] [1.30196] [0.54171] [0.97198]

(0.03095) (0.49468) (0.00415) (1.64371) [0.79564] [0.42380] [1.83935] [0.38668]

(2.87562) (45.9662) (0.38569) (152.735) [0.99204] [0.03142] [0.90369] [0.43019]

(2.56418) (40.9878) (0.34391) (136.193) [0.64100] [1.39042] [1.77363] [0.28784]

(0.01213) (0.19387) (0.00163) (0.64419) [0.76609] [0.26370] [0.64291] [1.70524]

(0.01016) (0.16248) (0.00136) (0.53989) [1.24711] [0.23017] [1.50076] [0.62100]

(2.68089) (42.8534) (0.35957) (142.392) [1.49048] [0.70161] [2.71117] [0.75733]

USD\_TRY(1) 0.519237 5.242203 0.018683 12.66113

USD\_TRY(2) 0.521707 3.284314 0.116449 34.40483

TR(1) 0.033199 0.584900 0.002042 1.450924

TR(2) 0.024623 0.209647 0.007635 0.635585

USA(1) 2.852733 1.444260 0.348541 65.70581

USA(2) 1.643630 56.99025 0.609977 39.20152

MSCI\_EMERGING(1) 0.009292 0.051124 0.001046 1.098503

MSCI\_EMERGING(2) 0.012677 0.037399 0.002046 0.335273

C 3.995803 30.06631 0.974848 107.8384

R-squared 0.893257 0.940998 0.955591 0.778050 Adj. R-squared 0.608608 0.783658 0.837167 0.186182 Sum sq. resids 0.000172 0.043909 3.09E06 0.484785 S.E. equation 0.007568 0.120980 0.001015 0.401989 F-statistic 3.138103 5.980680 8.069210 1.314567 Log likelihood 49.89570 16.63606 74.00372 2.226473 Akaike AIC 6.815950 1.272677 10.83395 1.128921 Schwarz SC 6.452270 0.908997 10.47027 1.492601 Mean dependent 2.151733 9.187219 0.234792 44.07875 SD dependent 0.012098 0.260102 0.002516 0.445605


**Vector autoregression estimates**

*DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 7/15/2016–8/04/2016. Included observations: 15.*

**Table 8.**

**99**

*Standard errors in () & t-statistics in [].*

*VAR estimates result for political stress #7.*

**USD\_TRY TR USA MSCI\_EMERGING**

(0.15992) (0.37246) (0.03780) (1.29406) [0.23756] [3.70373] [0.70742] [1.19628]

(0.21112) (0.49171) (0.04990) (1.70841) [3.14659] [2.01564] [0.16005] [1.73526]

(0.09284) (0.21622) (0.02194) (0.75124) [1.74614] [1.30083] [0.98678] [1.44184]

(0.07228) (0.16834) (0.01708) (0.58489) [0.66551] [0.61910] [0.77712] [1.53684]

(1.90754) (4.44268) (0.45085) (15.4357) [1.22046] [2.73072] [2.35717] [0.93980]

(1.82020) (4.23925) (0.43020) (14.7289) [1.24275] [3.10604] [0.00962] [0.49757]

(0.04461) (0.10390) (0.01054) (0.36098) [2.61818] [0.65790] [0.96199] [0.51984]

(0.03527) (0.08215) (0.00834) (0.28544) [0.66601] [3.21096] [0.56636] [0.28861]

(2.04631) (4.76587) (0.48364) (16.5586) [3.17743] [1.10676] [0.72766] [2.58386]

USD\_TRY(1) 0.037991 1.379474 0.026738 1.548057

*External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil…*

USD\_TRY(2) 0.664323 0.991110 0.007986 2.964535

TR(1) 0.162109 0.281267 0.021652 1.083173

TR(2) 0.048103 0.104220 0.013276 0.898872

USA(1) 2.328077 12.13171 1.062720 14.50641

USA(2) 2.262053 13.16730 0.004139 7.328605

MSCI\_EMERGING(1) 0.116796 0.068353 0.010143 0.187650

MSCI\_EMERGING(2) 0.023493 0.263795 0.004722 0.082381

C 6.501998 5.274677 0.351928 42.78517

R-squared 0.855084 0.959389 0.991451 0.725483 Adj. R-squared 0.661862 0.905240 0.980052 0.359461 Sum sq. resids 0.002215 0.012015 0.000124 0.145044 S.E. equation 0.019214 0.044750 0.004541 0.155480 F-statistic 4.425407 17.71779 86.97880 1.982072 Log likelihood 44.86974 32.18810 66.50640 13.50670 Akaike AIC 4.782632 3.091747 7.667519 0.600893 Schwarz SC 4.357802 2.666916 7.242689 0.176063 Mean dependent 3.025113 9.883607 0.729647 35.91900 SD dependent 0.033043 0.145372 0.032153 0.194268

*Sample: 11/24/2015–12/08/2015.*

*Included observations: 11.*

*Standard errors in () & t-statistics in [].*

#### **Table 7.**

*VAR estimates result for political stress #6.*


### *External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil… DOI: http://dx.doi.org/10.5772/intechopen.89931*

*Sample: 7/15/2016–8/04/2016.*

*Included observations: 15.*

*Standard errors in () & t-statistics in [].*

#### **Table 8.**

*VAR estimates result for political stress #7.*

**Vector autoregression estimates**

*Financial Crises - A Selection of Readings*

*Sample: 11/24/2015–12/08/2015. Included observations: 11.*

**Table 7.**

**98**

*Standard errors in () & t-statistics in [].*

*VAR estimates result for political stress #6.*

**USD\_TRY TR USA MSCI\_EMERGING**

(0.21444) (0.27058) (0.20349) (13.1649) [0.97393] [2.05054] [1.26918] [0.55906]

(0.26409) (0.33322) (0.25060) (16.2126) [0.10731] [1.72944] [0.60337] [0.65621]

(0.41552) (0.52430) (0.39430) (25.5093) [2.03980] [0.25486] [0.07161] [0.69250]

(0.36342) (0.45856) (0.34486) (22.3107) [1.29759] [0.10029] [0.32114] [0.00842]

(1.16439) (1.46920) (1.10491) (71.4826) [2.06643] [0.43065] [1.13127] [1.13096]

(1.29648) (1.63587) (1.23026) (79.5917) [3.03234] [0.49380] [0.04902] [0.84093]

(0.01389) (0.01753) (0.01318) (0.85275) [0.72132] [0.50792] [0.36075] [0.77344]

(0.01135) (0.01432) (0.01077) (0.69677) [3.11402] [0.79790] [0.05422] [0.09210]

(5.87354) (7.41108) (5.57353) (360.580) [2.55504] [1.49000] [0.15796] [0.87491]

USD\_TRY(1) 0.208853 0.554838 0.258267 7.360014

USD\_TRY(2) 0.028340 0.576283 0.151205 10.63891

TR(1) 0.847586 0.133623 0.028234 17.66526

TR(2) 0.471574 0.045990 0.110749 0.187963

USA(1) 2.406126 0.632717 1.249959 80.84426

USA(2) 3.931361 0.807797 0.060307 66.93084

MSCI\_EMERGING(1) 0.010020 0.008902 0.004755 0.659546

MSCI\_EMERGING(2) 0.035343 0.011427 0.000584 0.064169

C 15.00712 11.04252 0.880388 315.4749

R-squared 0.976238 0.940271 0.993659 0.937157 Adj. R-squared 0.881190 0.701355 0.968296 0.685786 Sum sq. resids 6.20E05 9.86E05 5.58E05 0.233487 S.E. equation 0.005566 0.007023 0.005281 0.341677 F-statistic 10.27098 3.935577 39.17780 3.728184 Log likelihood 50.87040 48.31268 51.44711 5.580570 Akaike AIC 7.612800 7.147761 7.717657 0.621715 Schwarz SC 7.287250 6.822210 7.392107 0.947265 Mean dependent 2.900682 11.35010 0.435164 34.01700 SD dependent 0.016147 0.012850 0.029661 0.609542


**Author details**

Social Sciences University of Ankara, Turkey

provided the original work is properly cited.

\*Address all correspondence to: dogus.emin@asbu.edu.tr

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

*External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil…*

*DOI: http://dx.doi.org/10.5772/intechopen.89931*

Dogus Emin

**101**

*Sample: 7/02/2018–10/02/2018.*

*Included observations: 67.*

*Standard errors in () & t-statistics in [].*

#### **Table 9.**

*VAR estimates result for political stress #8.*

*External Factors on Turkish Short-Term Interest Rates and Daily Exchange Rates: Tranquil… DOI: http://dx.doi.org/10.5772/intechopen.89931*
