Identifying financial bubbles in borsa İstanbul and the relationship between bubbles and financial crisis

The aim of this study is to identify the financial bubbles in Turkey Capital Markets and to examine crises from a different perspective by testing the relationship between financial bubbles and crises. Right-tailed unit root tests were used to determine the bubbles defined as the deviation of the asset prices from the basic value. The return series of Borsa İstanbul 100, Borsa İstanbul Financial, Borsa İstanbul Industrial and Borsa İstanbul Service Indices has taken as representative of Turkey Capital Markets and the examination period of these indices has determined as 1997-2018 period considering the increase in index transaction volume.In the period examined, bubble findings have been found in the return series of the indices.The second step of the study is to examine the relationship between the detected bubbles and financial crises. Macroeconomic variables identified as indicators of financial crises are; gross domestic product, foreign trade deficit, total foreign debt, real exchange rate, budget deficit, credit / gross domestic product, interest rate, domestic credit volume, money supply and inflation. The relationship between macroeconomic variables and bubbles was tested by asymmetric causality test.According to the results of Hatemi-J test, which tests causality by taking positive and negative shocks of variables into account, the decrease in interest rates, the increase in money supply and credit volume have fed the bubble positively. The collapse phase of the bubbles, on the other hand, has caused an increase in the budget deficit, foreign debt and exchange rate, while adversely affecting growth.