The impacts of foreign portfolio flows and monetary policy responses on stock markets by considering COVID-19 pandemic: Evidence from Turkey

Kartal M. T., ERTUĞRUL H. M., Ulussever T.

Borsa Istanbul Review, vol.22, no.1, pp.12-19, 2022 (SSCI) identifier

  • Publication Type: Article / Article
  • Volume: 22 Issue: 1
  • Publication Date: 2022
  • Doi Number: 10.1016/j.bir.2021.06.003
  • Journal Name: Borsa Istanbul Review
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, EconLit, Directory of Open Access Journals
  • Page Numbers: pp.12-19
  • Keywords: COVID-19 pandemic, Foreign portfolio flows, Monetary policy responses, MSR, NARDL, Stock markets, Turkey
  • Anadolu University Affiliated: No


This study researches the impacts of foreign portfolio flows (proxied by foreign investors' retention share) and monetary policy responses (proxied by the repurchase interest rate) on Turkey's stock market index taking the COVID-19 pandemic into consideration. A volatility index, credit default swap spreads, and foreign exchange rates are used as control variables, with a daily dataset between January 2, 2017, and October 20, 2020. After examining the stationarity and nonlinearity characteristics of the variables, we applied a nonlinear autoregressive distributed lag (NARDL) model and then conducted a Markov switching regression (MSR) for a robustness check. The results reveal that both foreign portfolio flows and monetary responses have an important effect on the index, and foreign portfolio flows have a higher effect than monetary responses. Accordingly, the results obtained from the NARDL and MSR models are robust and consistent.