The Impacts of Oil Prices, Exchange Rate and COVID-19 Pandemic on BIST Petrochemical Market
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Jun 21, 2021
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Abstract
Stock markets are developing with the economic growth of the countries in a liberal market economy. Petrochemicals is an indicator of the performance of the country's industry with high inter-industry linkage by providing input to several sectors, producing various outputs with a certain number of raw materials. The COVID-19 pandemic period has affected all markets worldwide and caused fluctuations in the index values of large firms in the petrochemical industry in Borsa Istanbul (BIST). This study analyzes the impact of the pandemic period and change in the oil prices and exchange rate on the petrochemical market in Turkey. The monthly data of petrochemical stock market index, exchange rate, oil prices are used in this time series analysis. A pandemic information index representing the COVID-19 pandemic was derived and included in the model. According to the results, it is observed that the most important determinant of the fluctuations on the BIST petrochemical index is the oil prices. While a shock in oil prices negatively affects the BIST petrochemical index, the petrochemical index responds positively to the shock in the pandemic index.
JEL classification: N50, G10, E4
Keywords: Petrochemical stock market, Pandemic information index, Oil prices, Time series analysis
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Mutlu Çamoğlu, S. (2021) “The Impacts of Oil Prices, Exchange Rate and COVID-19 Pandemic on BIST Petrochemical Market”, World Journal of Applied Economics, 7(1), pp. 17-33. doi: 10.22440/wjae.7.1.2.
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Research Articles
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References
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Engle, R. F., & Granger, C. W. J. (1987). Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55 (2), 251-76. doi:10.2307/1913236
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Greenwood, J., & Smith, B. D. (1997). Financial Markets in Development, and the Development of Financial Markets. Journal of Economic Dynamics and Control , 21 (1), 145-81. doi:10.1016/0165-1889(95)00928-0
Gonullu, C. & Otluoglu, E. & Sengoz, M. (2015). Ham Petrol Fiyati Degisimlerinin Petrokimya Sektoru Getirileri Uzerindeki Etkisi (The Impact of Crude Oil Price Changes on Petrochemical Industry Returns). Uluslararasi Iktisadi ve Idari Incelemeler Dergisi, 7 (14), 223-34.
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Johansen, S. (1995). Likelihood Based Inference in Cointegrated Vector Autoregressive Models. Oxford University Press.
Kiss, G. D., Tanacs, G. Z., Lippai-Makra, E., & Racz, T. A. (2020). Last Resort: European Central Bank's Permanent Engagement in Tackling Foreign Exchange Liquidity Disruptions in the Euro Area Banking System. Financial and Economic Review, 19 (4), 83-106. doi:10.33893/FER.19.4.83106
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Levine, R., & Zervos, S. (1996). Stock Market Development and Long-run Growth. The World Bank Economic Review, 10 (2), 323-39. doi:10.1093/wber/10.2.323
Liu, F., Shao, S., & Zhang, C. (2020). How Do China's Petrochemical Markets React to Oil Price Jumps? A Comparative Analysis of Stocks and Commodities. Energy Economics, 92. doi:10.1016/j.eneco.2020.104979
Lutkepohl, H. (2015). Vector Autoregressive Models. In N. Hashimzade & M. A. (Eds.), Handbook of Research Methods and Applications in Empirical Macroeconomics. Edward Elgar Publishing.
Lutkepohl, H., & Kratzig, M. (2004). Applied Time Series Econometrics. Cambridge University Press. doi:10.1017/CBO9780511606885
Mensi, W. (2019). Global Financial Crisis and Co-movements between Oil Prices and Sector Stock Markets in Saudi Arabia: A VAR based Wavelet. Borsa Istanbul Review, 19 (1), 24-38. doi:10.1016/j.bir.2017.11.005
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Ozer, A. (2017). Petrol Fiyatlari ile Hisse Senedi Getirileri Arasinda Volatilitenin Yayilma Etkisi: Gelismis ve Gelismekte olan Ulkeler Ornegi (Volatility Spillovers between Oil Prices and Stock Returns: Developed and Developing Countries Case). International Journal of Management Economics & Business/Uluslararasi Yonetim Iktisat ve Isletme Dergisi, 13 (13), 654-62.
Ozturk, M. B. & Gumus, G. K. & Taskin, F. D. & Cagli, E. C. (2013). Petrol ve Dogalgaz Fiyatlari ile Imalat ve Kimya-petrol-plastik Sektorlerinin Endeksleri Arasindaki Iliski (The Relationship between Oil and Natural Gas Prices and Manufacturing and Chemical-Petroleum-Plastic Industry). Nigde Universitesi Iktisadi ve Idari Bilimler Fakultesi Dergisi, 6 (2), 64-74.
Oguz, A. (2018). Ozellestirmenin Gerekcesi ve Etkinligi: Petro-Kimya Firmalari Uzerine Bir Uygulama (Rationale and Effectiveness of Privatization: An Application on Petro-Chemical Companies). In A. Oguz (Ed.), Turkiye'de Ekonomi-Yonetim-Siyaset Uzerine (On Economy-Management-Politics in Turkey). Academia Publishing.
Phillips, P., & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75 (2), 335-46. doi:10.2307/2336182
Rafiq, S., Salim, R., & Bloch, H. (2009). Impact of Crude Oil Price Volatility on Economic Activities: An Empirical Investigation in the Thai Economy. Resources Policy, 34 (3), 121-32. doi:10.1016/j.resourpol.2008.09.001
Sims, C. A. (1980). Macroeconomics and Reality. Econometrica, 48 (1), 1-48. doi:10.2307/1912017
Stock, J. H., & Watson, M. W. (2001). Vector Autoregressions. Journal of Economic perspectives, 15 (4), 101-15. doi:10.1257/jep.15.4.101
Turkish Plastics Industrialists Research, Development and Education Foundation (PAGEV). (2021). Petrokimya Endustrisi ile Ilgili Sorular, Cevaplar (Questions and Answers Related to the Petrochemical Industry). https://pagev.org/petrokimya-endustrisi-ile-ilgili-sorular-cevaplar.
Turkish Statistical Institute (TURKSTAT). (2021). Producer Price Index. https://tuikweb.tuik.gov.tr.
Verbeek, T., & Mah, A. (2020). Integration and Isolation in the Global Petrochemical Industry: A Multiscalar Corporate Network Analysis. Economic Geography, 96 (4), 363-87. doi:10.1080/00130095.2020.1794809
Weinhagen, J. (2002). An Empirical Analysis of Price Transmission by Stage of Processing. Monthly Labor Review, 125 (11), 3-11. doi:10.1023/A:1011043120145
Atas, H., & Guler, H. (2020). Turkiye'nin Dogal Gaz, Petrol ve Komur Tuketiminin Buyumeye Etkisi: Ekonometrik Bir Analiz (The Effects of Turkey's Natural Gas, Oil and Coal Consumption on Growth: An Econometric Analysis). Cukurova Universitesi Sosyal Bilimler Enstitusu Dergisi , 29 (3), 524-39.
Aydogus, O. (2020). Salgın ve Ekonomik Kriz (Pandemic and Economic Crisis). In Iktisat ve Toplum Dergisi (Vol. 114).
Bayrac, H. N. (2019). Kuresel Petrol Piyasasinda Fiyat Olusumu ve Ekonomik Etkileri (Price Formation in the Global Petroleum Market and Its Economic Effects). Yalova Sosyal Bilimler Dergisi , 9 (19), 44-59.
Brown, D. J., & Schrader, L. F. (1990). Cholesterol Information and Shell Egg Consumption. American Journal of Agricultural Economics, 72 (3), 548-55. doi:10.2307/1243023
Caporale, G. M., Ali, F. M., & Spagnolo, N. (2015). Oil Price Uncertainty and Sectoral Stock Returns in China: A Time-varying Approach. China Economic Review, 34 , 311-21. doi:10.1016/j.chieco.2014.09.008
Central Bank of Republic of Turkey (CBRT). (2021). Electronic Data Distribution System. https://evds2.tcmb.gov.tr/.
Chern, W., & Rickertsen, K. (2003). Health, Nutrition and Food Demand. Cabi Publishing, Wallingford.
Chern, W., & Zuo, J. (2006). Impacts of Fat and Cholesterol Information on Consumer Demand: Application of News Indexes (Working Papers No. 28321). The Ohio State University.
Colak, O. F. (2020). Salgına Karsi Ekonomik Onlemler Artirilmali (Economic Measures Against the Pandemic Should be Increased). In Iktisat ve Toplum Dergisi (Vol. 114).
Constant, Z. S. (2010). Export-Led Growth Hypothesis: Evidence from Cote d'Ivoire (Working Papers). SSRN. doi:10.2139/ssrn.2501806
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of American Statistical Association, 74 (366), 427-31. doi:10.2307/2286348
Elmastas Gultekin, O. and Akturk Hayat, E. (2016). Altin Fiyatini Etkileyen Faktorlerin VAR Modeli Ile Analizi: 2005-2015 Donemi (Analysis of Factors Affecting the Gold Price Through VAR Model: 2005-2015 Period). Ege Academic Review, 16 (4), 611-25.
Engle, R. F., & Granger, C. W. J. (1987). Co-Integration and Error Correction: Representation, Estimation, and Testing. Econometrica, 55 (2), 251-76. doi:10.2307/1913236
Ewing, B. T., Riggs, K., & Ewing, K. L. (2007). Time Series Analysis of a Predator-prey System: Application of VAR and Generalized Impulse Response Function. Ecological Economics, 60 (3), 605-12. doi:10.1016/j.ecolecon.2006.01.002
Gourene, G. A. Z., & Mendy, P. (2018). Oil Prices and African Stock Markets Comovement: A Time and Frequency Analysis. Journal of African Trade, 5 (1-2), 55-67. doi:10.1016/j.joat.2018.03.002
Greenwood, J., & Smith, B. D. (1997). Financial Markets in Development, and the Development of Financial Markets. Journal of Economic Dynamics and Control , 21 (1), 145-81. doi:10.1016/0165-1889(95)00928-0
Gonullu, C. & Otluoglu, E. & Sengoz, M. (2015). Ham Petrol Fiyati Degisimlerinin Petrokimya Sektoru Getirileri Uzerindeki Etkisi (The Impact of Crude Oil Price Changes on Petrochemical Industry Returns). Uluslararasi Iktisadi ve Idari Incelemeler Dergisi, 7 (14), 223-34.
Gurdamar, B. (2020). Uzmanlardan 'Yeni Borsa Magdurlari Olmasin Uyarisi'('No New Stock Market Victims' Warning from Experts). https://www.aa.com.tr/tr/ekonomi/uzmanlardan-yeni-borsa-magdurlari-olmasin-uyarisi/2090715.
Investing. (2021). BIST Chemical, Petroleum & Plastic (XKMYA). https://tr.investing.com/indices/ise-chem.,petrol.,plastic.
Johansen, S. (1995). Likelihood Based Inference in Cointegrated Vector Autoregressive Models. Oxford University Press.
Kiss, G. D., Tanacs, G. Z., Lippai-Makra, E., & Racz, T. A. (2020). Last Resort: European Central Bank's Permanent Engagement in Tackling Foreign Exchange Liquidity Disruptions in the Euro Area Banking System. Financial and Economic Review, 19 (4), 83-106. doi:10.33893/FER.19.4.83106
Korcan, U. (2021). Temettu Verimi Yuksek Hisseden Cifte Kazanc (Double Earnings from High Dividend Yield). https://www.dunya.com/finans/haberler/borsa/temettu-verimi-yuksek-hisseden-cifte-kazanc-haberi-610821.
Levine, R., & Zervos, S. (1996). Stock Market Development and Long-run Growth. The World Bank Economic Review, 10 (2), 323-39. doi:10.1093/wber/10.2.323
Liu, F., Shao, S., & Zhang, C. (2020). How Do China's Petrochemical Markets React to Oil Price Jumps? A Comparative Analysis of Stocks and Commodities. Energy Economics, 92. doi:10.1016/j.eneco.2020.104979
Lutkepohl, H. (2015). Vector Autoregressive Models. In N. Hashimzade & M. A. (Eds.), Handbook of Research Methods and Applications in Empirical Macroeconomics. Edward Elgar Publishing.
Lutkepohl, H., & Kratzig, M. (2004). Applied Time Series Econometrics. Cambridge University Press. doi:10.1017/CBO9780511606885
Mensi, W. (2019). Global Financial Crisis and Co-movements between Oil Prices and Sector Stock Markets in Saudi Arabia: A VAR based Wavelet. Borsa Istanbul Review, 19 (1), 24-38. doi:10.1016/j.bir.2017.11.005
Ministry of Health of Republic of Turkey (MoH). (2021). General Coronavirus Table - COVID-19 Information Page. https://covid19.saglik.gov.tr/TR-66935/genel-koronavirus-tablosu.html.
Ozer, A. (2017). Petrol Fiyatlari ile Hisse Senedi Getirileri Arasinda Volatilitenin Yayilma Etkisi: Gelismis ve Gelismekte olan Ulkeler Ornegi (Volatility Spillovers between Oil Prices and Stock Returns: Developed and Developing Countries Case). International Journal of Management Economics & Business/Uluslararasi Yonetim Iktisat ve Isletme Dergisi, 13 (13), 654-62.
Ozturk, M. B. & Gumus, G. K. & Taskin, F. D. & Cagli, E. C. (2013). Petrol ve Dogalgaz Fiyatlari ile Imalat ve Kimya-petrol-plastik Sektorlerinin Endeksleri Arasindaki Iliski (The Relationship between Oil and Natural Gas Prices and Manufacturing and Chemical-Petroleum-Plastic Industry). Nigde Universitesi Iktisadi ve Idari Bilimler Fakultesi Dergisi, 6 (2), 64-74.
Oguz, A. (2018). Ozellestirmenin Gerekcesi ve Etkinligi: Petro-Kimya Firmalari Uzerine Bir Uygulama (Rationale and Effectiveness of Privatization: An Application on Petro-Chemical Companies). In A. Oguz (Ed.), Turkiye'de Ekonomi-Yonetim-Siyaset Uzerine (On Economy-Management-Politics in Turkey). Academia Publishing.
Phillips, P., & Perron, P. (1988). Testing for a Unit Root in Time Series Regression. Biometrika, 75 (2), 335-46. doi:10.2307/2336182
Rafiq, S., Salim, R., & Bloch, H. (2009). Impact of Crude Oil Price Volatility on Economic Activities: An Empirical Investigation in the Thai Economy. Resources Policy, 34 (3), 121-32. doi:10.1016/j.resourpol.2008.09.001
Sims, C. A. (1980). Macroeconomics and Reality. Econometrica, 48 (1), 1-48. doi:10.2307/1912017
Stock, J. H., & Watson, M. W. (2001). Vector Autoregressions. Journal of Economic perspectives, 15 (4), 101-15. doi:10.1257/jep.15.4.101
Turkish Plastics Industrialists Research, Development and Education Foundation (PAGEV). (2021). Petrokimya Endustrisi ile Ilgili Sorular, Cevaplar (Questions and Answers Related to the Petrochemical Industry). https://pagev.org/petrokimya-endustrisi-ile-ilgili-sorular-cevaplar.
Turkish Statistical Institute (TURKSTAT). (2021). Producer Price Index. https://tuikweb.tuik.gov.tr.
Verbeek, T., & Mah, A. (2020). Integration and Isolation in the Global Petrochemical Industry: A Multiscalar Corporate Network Analysis. Economic Geography, 96 (4), 363-87. doi:10.1080/00130095.2020.1794809
Weinhagen, J. (2002). An Empirical Analysis of Price Transmission by Stage of Processing. Monthly Labor Review, 125 (11), 3-11. doi:10.1023/A:1011043120145