How do Stock Prices and Metal Prices Contribute to Economic Activity in Turkey? The Importance of Linear and Non-linear ARDL

This study explores the association between stock prices, metal prices and economic activity, i.e. industrial production, for the Turkish economy for the period 1896M1-2016M12. The linear and non-linear analysis is conducted by applying the autoregressive distributed lag (ARDL) and non-linear autoregressive distributed lag (NARDL) approaches. The combined cointegration approach is applied to test the robustness of the ARDL and NARDL approaches. The FMOLS, DOLS and CCR regressions are applied to examine the long-run effect of stock prices and metal prices on economic activity. The empirical results reveal that metal and stock prices have a positive impact on economic activity. Metal prices have a negative impact and economic activity has positive effects on stock prices. Furthermore, the NARDL model corroborates the findings obtained from the ARDL model. This paper presents policy guidelines to utilise metals as an economic tool to boost economic activity and stock prices.