INVESTIGATING THE NEXUS AMONG FINANCIAL, POLITICAL, AND ECONOMIC RISKS IN TURKEY: APPLICATION OF QUANTILE-ON-QUANTILE REGRESSION APPROACH.

This study investigates the relationships among the political, financial and economic risks in Turkey using the PRS Group Risks indices covering the period from 1984Q1 to 2018Q4. The nature and directions of the relationship were examined using the innovative Quantile-on-Quantile (Q-Q) regression and Quantile Granger-causality test. Our findings revealed a positive and significant influence of economic risk on financial risk, as well as a positive and significant influence financial risk on economic risk, both at different quantiles. Moreover, while economic risk was found to positively influence political risk at different quantiles, the influence of political risk on economic risk was found to be negative at different quantiles. In addition, the findings on the direction of causal relationship show bidirectional causality between economic risk and political risks, financial and political risks, and financial and political risks in the 0.25 quantiles. Similarly, at 0.75 quantiles, a bidirectional causality between political and economic risks was found, as well as a unidirectional causality was found running from economic risk to financial risk, and from economic risk to financial risk. Meanwhile, at the 0.5 quantile, an evidence of a unidirectional causality was found running from economic risk to political risk and from economic risk to financial risk. Finally, the paper suggested policy directions based on the findings for the Turkish policymakers. [ABSTRACT FROM AUTHOR]