Interest Rates, Foreign Exchange Rates and Stock Prices in Turkey: Price and Volatility Spillover Effects

This paper analyses inter-market price and volatility spillover effects among Turkish government debt securities, foreign exchange and stock markets based on Multivariate EGARCH Model. The empirical results show the followings: (i) There are significant price spillovers from both government debt securities and stock markets to foreign exchange market but there is no evidence of the price spillover effect from foreign exchange market to the other markets, (ii) There exists a bidirectional price spillover between government debt securities market and stock market, (iii) The results point out significant volatility spillovers and asymmetric effects from both stock and foreign exchange markets to government debt securities market but there are no significant volatility spillovers from government debt securities market to the others, (iv) The volatility spillover effect between stock market and foreign exchange market is bidirectional, (v) Leverage effect is highly significant for all markets, (vi) Volatility shocks are highly persistent in the stock and foreign ecxhange markets, but not in the government debt securities market, (v) The findings of this study also show that there is no long run relationship among three markets.