The relationship between risk and uncertainty and economic growth: an empirical application in the case of Türkiye

In the Turkish economy, which is a developing country, it is known that it has become quite difficult to maintain the targeted economic growth and sustainability of this growth. In this context, both political factors and the risks and uncertainties brought about by geopolitical location are hindering economic growth. Moreover, it is important for policymakers to be prepared for events that will affect the fundamental dynamics of national economies such as wars, coups, terrorist incidents and natural disasters, and then to formulate rational and consistent economic policies in this environment of risk and uncertainty. The aim of this study is to examine the effects of economic, political, and geopolitical risks and uncertainties on economic growth in the Turkish economy, based on the data obtained. The study utilizes the Geopolitical Risk İndex (GPR), Credit Default Swap (CDS), Global Economic Policy Uncertainty (GEPU) indices, Real Gross Domestic Product (RGDP), Employment (IST) and Gross Fixed Capital Formation (GFC) data. In the analyses, unit root tests such as the Augmented Dickey-Fuller (ADF), Phillips-Perron (PP), and Zivot-Andrews unit root tests are used. On the other hand, the ARDL model is also used to explain the short- and long-term relationships. At the end of the study, the direction of causality between the series is investigated using the Toda-Yamamoto (1995) method. According to the results of the boundary test, long-term cointegration relationships are observed between RGDP and the variables IST, GFC, GPR, CDS, and GEPU at the 5% and 10% significance levels. Finally, there is a bidirectional and significant causality between IST and CDS, between GFC and CDS, and between GEPU and GFC, as well as a unidirectional and significant causality from GFC to IST, from RGDP to GFC, and from GPR to RGDP, GFC, and GEPU.