Time–Frequency Based Causality Analysis of The Relationship Between Economic Complexity And Capital Markets in Turkey: Evidence From Fourier And Wavelet Approaches
DOI:
https://doi.org/10.63556/tisej.2025.1447Keywords:
Economic Complexity, Capital Market, Wavelet Coherence Analysis, Fourier Toda-Yamamoto Causality Test, TürkiyeAbstract
Economic complexity, reflecting a country’s production diversity and technological capability, is a key indicator for understanding financial market dynamics. This study examines the relationship between economic complexity and Türkiye’s capital market from 1995 to 2023. The analysis focuses on interactions between the Economic Complexity Index (ECI) and indicators such as the BIST100 index, trading volume, number of listed companies, market capitalization, and foreign investor volume. The Fourier Toda-Yamamoto causality test and Wavelet Coherence Test are employed. Results indicate that ECI significantly impacts the BIST100 index, trading volume, and number of listed companies. A bidirectional causality is found between ECI and number of firms. However, no significant causality is observed between ECI and market capitalization. The relationship between ECI and foreign investor volume exists only for a limited period. The ECI–BIST100 linkage is strong from 1998 to 2008 but weakens post-crisis. The findings suggest that the influence of economic complexity on capital markets changes over time, reflecting the sensitivity of market dynamics to economic diversity. This study contributes to the literature by examining the time–frequency evolution of the relationship between economic complexity and capital markets in Türkiye, offering deeper insight into financial market dynamics.
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