The Impact of Changes in Foreign Exchange Rates and Commodity Prices on the Volatility of BIST Sectoral Indices

Abstract

In this study, the effects of exchange rate and commodity price fluctuations on the volatility of the BIST Industrial, BIST Services, and BIST Food & Beverage indices are empirically examined using the TGARCH method. For the exchange rate, a basket composed of 50% U.S. dollar and 50% euro was employed, while for commodity prices the Bloomberg Commodity, Industrial Metals, Precious Metals, Petroleum, and Agriculture indices were utilized. The analyses were conducted for the post-2008 crisis period, with a sub-period distinction based on the 2018 currency crisis, covering 2009-2017 and 2018-2024. During the 2009-2017 period, the impact of the exchange rate was found to be negative and statistically significant across all models. The effects of commodities were more limited; however, industrial metals and petroleum products exhibited positive effects in certain models. In this period, volatility persistence was particularly pronounced in the services sector, while the food sector appeared relatively more vulnerable to negative shocks. In the 2018-2024 period, exchange rate pressures continued, and the interaction between commodities and stock indices expanded considerably. Moreover, volatility dynamics underwent significant changes and the persistence of shocks increased.