The effects of macroeconomic variables on BIST 100 and BIST Industrial Index: Time series analysis

The level of development in financial markets is a critical indicator of a country's economic stability and growth potential. In developing countries in particular, the responses of stock market indices to macroeconomic variables play a decisive role in shaping investment decisions and in the effectiveness of monetary policies. In emerging market economies such as Turkey, the relationship between financial market dynamics and macroeconomic indicators has been widely discussed in both the academic literature and among policy makers. This study analyzes the responses of two key financial and real sector indicators in Turkey—the Borsa Istanbul 100 Index (XU100) and the Manufacturing Industry Index (XUSIN)—to selected macroeconomic variables. The independent variables include M1 money supply, the consumer price index (inflation), the exchange rate (USD), the policy interest rate, and gold prices. The dataset covers monthly frequency data for the period 2018–2025 and has been processed in accordance with time series analysis requirements. The primary objective of the thesis is to evaluate the impact of macroeconomic indicators on stock and industrial indices not only through correlation but also by examining causality and dynamic interactions. To this end, the Augmented Dickey-Fuller (ADF) test was employed to assess stationarity, the Ordinary Least Squares (OLS) method was used to model contemporaneous relationships, the Granger causality test was applied to detect lagged effects, and shock responses were analyzed using the Vector Autoregression (VAR) model and impulse response functions. The robustness of the model was tested with the Variance Inflation Factor (VIF) method to assess the risk of multicollinearity. Through this comprehensive analysis, the effects of macroeconomic conditions on Turkey's capital markets and real sector were examined in depth. While the policy interest rate emerged as a significant and influential factor, the short-term and limited effects of other variables were also highlighted. This study aims to serve as a data-driven and methodologically robust reference for economic policy makers, investors, and researchers. Keywords: BIST-100, M1 Money Supply, Exchange Rate, Inflation, Interest Rate.