Dynamic Interactions and Volatility Analysis Between Stock Prices and Exchange Rates in Türki̇ye: Evidence From Ardl Nardl and Arch Models (2020-2024)

This article uses ARDL, NARDL, and ARCH econometric models to examine the dynamic relationship and volatility between stock prices and exchange rates in Türkiye (February 2, 2020 to May 5, 2024). The findings reveal significant bidirectional short-run linkages, indicating that exchange-rate fluctuations influence stock prices, while stock-price movements feedback to affect exchange rates. In the long run, the relationship weakens, and Johansen cointegration tests show no stable equilibrium, suggesting that persistent macroeconomic shocks and market forces prevent convergence. The NARDL model confirms asymmetric effects: currency appreciation has a stronger and more persistent negative effect on stock prices than depreciation, reflecting investors’ sensitivity to adverse developments. Volatility analysis demonstrates clustering patterns, with exchange-rate shocks amplifying stock-market volatility during periods of economic and geopolitical uncertainty. These results underscore Türkiye’s financial vulnerability to exchange-rate instability and offer important insights for policymakers and investors in managing risks in volatile emerging-market environments.