Essays in International Finance
Abstract
This dissertation studies topics of international finance. The focus is on Turkiye, an open emerging economy in G-20. Turkiye is a growing economy with financial vulnerabilities. The country's energy dependency and related current account deficit create pressure on the economy. Also, the country's geographic region leads to severe disaster and climate risks. This dissertation studies how these risks could affect the economy. The first chapter focuses on constructing an Exchange Market Pressure (EMP) index from literature for Turkiye, an open emerging market, and exploring its relation with international capital flows. EMP is successful at capturing the stress periods of the Turkish Lira. I use the Autoregressive Distributed Lag Model (ARDL) and find that portfolio investment and other investment inflows help decrease pressure in the exchange market. In contrast, the effects of foreign direct investment (FDI) inflows are insignificant, but outflows increase the pressure on the exchange rate market. The second chapter uses freely available data from The World Bank Sovereign ESG Data Portal to build an Environmental, Social and Governance (ESG) score and then applies panel data estimation to examine the relationship between ESG score and macroeconomic variables for the 1999-2020 sample period. Industrial production negatively correlates with ESG scores; emerging markets have lower scores than developed countries. Self-employment has a positive relationship with the ESG score, which may imply that working conditions are better than other work modes. The third chapter explores the effects of the 2023 Kahramanmaras earthquakes in Turkiye on Turkish GDP by using Synthetic Control Method (SCM). With SCM, I construct a synthetic Turkiye, taking countries that have similar economic structures and checking whether there is a difference between Turkiye and synthetic Turkiye in terms of Gross Domestic Product (GDP) right after the earthquake. The results show that earthquakes did not significantly affect Turkish GDP during the sample period.