Author :
DOI : 10.16992/ASOS.13210
Year-Number: 2018-64
Language : null
Konu : Finans
Abstract
Belçika, Avrupa Birliği’nin altı kurucu devletinden birisi olarak siyasi arenada önemli bir rol oynamasının yanında, gelişmiş finansal piyasaları ile ekonomik olarak da kendini ispat etmiş Avrupa’ nın lokomotif ülkelerinden birisidir. Ancak tarihi kökleri ile alakalı olarak “Valon – Flaman” tartışması, Belçika siyasi, politik ve ekonomik hayatını belirli dönemlerde sekteye uğratan önemli engellerden birisi olarak görülmektedir. 2006 yılından başlayarak 2012 yılına kadar devam eden politik istikrarsızlık bu dönemlere örnek olarak gösterilebilir. Bu çalışmanın amacı: Belçika'nın 2006-2012 yılları arasında yaşadığı politik istikrarsızlıkların, mali piyasalarına olan etkisinin incelenmesidir Politik istikrarın sağlanamadığı bu dönemde, Belçika finans piyasalarının politik istikrasızlık ile olan ilişkisi Johansen Eşbütünleşme Analizi kullanılarak araştırılmış ve uzun dönemde veriler arasında eşbütünleşme tespit edilmiştir. Ayrıca amaç fonksiyonunun 2005-2011 yılları arasında yapısal kırılmaya uğradığı da tespit edilmiştir. Politik istikrarsızlığın işsizlik ve enflasyon ilişkisinin araştırılmasında aynı yöntemler kullanılmış, veriler arasında uzun dönemde eşbütünleşme tespit edilmiş, ancak amaç fonksiyonunda yapısal bir kırılma bulunamamıştır. Tespit edilen bu bulgular doğrultusunda; Belçika ölçeği içerisinde politik istikrarsızlığın, finans piyasalarını negatif yönde etkilediği ve makro ekonomik yapıya ise etkisinin sınırlı olarak kaldığı tespit edilmiştir.
Keywords
Abstract
As one of the six founder states of European Union, Belgium is one of the locomotive states which economically proved itself with its developed financial markets, as well as playing a remarkable role in the political arena. However,” Valon-Flaman” debate related to its historical roots seems an important obstacle that interrupts the political and economic life of Belgium in certain periods. The political instability starting from 2006 to 2012 can be cited for these periods. The aim of this article is to examine the effect of political instabilities of Belgium between 2006-2012 on its financial markets. In this period which the political stability could not be established the relationship of financial markets of Belgium with political instability has been researched by using Johansen Cointegration Analysis, and a cointegration in long term between the data has been identified. Besides, it is also identified that the objective function has been fallen into a structural crash between 2005-2011. While researching the relationship of political instability with unemployment and inflation, the same methods have been used, the cointegration in the long-term between data has been identified, but a structural crash in objective function could not be found. In accordance with these identified findings, it has been identified that the political instability on Belgium scale has affected the financial markets in a negative way, but its effect on the macroeconomic structure remained limited.
Keywords
- Venieris and Gupta (1986) have determined a negative correlation between political instability
- Venieris and Gupta (1986) have determined a negative correlation between political instabilityand savings ratios. Barro (1991) have proved the existence of a negative relationship betweenpolitical instability and economic growth (Alesina and Perotti, 1996, 1204;Takım, 2012: 160).
- Alena et al. (1996) have examined the political instability and economic growth by using data of113 countries between 1052-1982 and as a result of the study they have set forth the existence of a negative relationship between political instability and economic growth.
- Alesina and Perotti (1996)have suggested through using data of 71 selected countries between1960-1985that the imbalances in income distribution caused political instability and also they have determined that the political instability has a negative influence on investments.
- EnverAlperGÜVEL (1998) has examined the fiscal policies and their impacts on inflation be-tween 1987-1997 and has determined that the government variability does not have any signifi-cant effect on economic indicators. However, he has proved that the stability of financial poli- cies create positive impacts on inflation and money supply.
- Lensinsk et al. (2000) have investigated the existence of the relationship between political risksand foreign capital flight and they have found a strong relationship between political risks and the foreign capital flight in especially developing countries.
- Eren and Bildirici (2001) have detected the existence ofnegative impact of coalition govern-ments on economic growth in their studies carried out through using data obtained between 1980-2001 in Turkey (Takım, 2012: 161).
- Asteriou and Price (2001) have sought the presence of a relationship by using political stabilityand economic growth GARCH-M model between 1961-1997 throughout United Kingdom. Inconsequence of studies conducted, the presence of a negative relationship between political instability and economic growth has been revealed.
- FundaTelatar (2003), in her study conducted throughout Turkey, has determined that economic instability causes to political instability independently of overall economic models.
- Mei and Guo (2004) have examined the volatility emerging in the stock market of 22 develop-ing countries during Asian crisis in 1998 and as a result of this research they have determinedthat the volatility in the market value of the companies increases during political uncertainty andthe crisis.But they have expressed that the impact of the crisis on volatility is greater than the impact of the political uncertainty.
- Akçoraoğlu and Yurdakul (2004), in their studies conducted through using three-month databelonging to the 1987-2003 period, have determined that an increase has been observed in thebudget deficit in Turkey in the general election periods in order to obtain a political success. Butit has been demonstrated that election periods don’t have a significant effect on inflation and economic growth.
- Bialkowskiet al. (2008)have measured the volatility in the market values of the companies dur-ing elections and after elections carried out in 27 OECD countries for measuring the results ofelections and the reaction given to these results by investors. In consequence of these studies,they have proved that the more the elections conclude in an unexpected way, the more the vola-tility in the market values of the companies increases. This situation means that uncertainty increases the risk perceptions of investors.
- Şanlısoy and Kök(2010) have examined the relationship between political instability and eco-nomic growth by using economic data published between 1987-2006 in concern with Turkey.As a result, they have determined that the existence ofan inverse relationship between both of variables in long-term.
- Unal Arslan (2011) has analyzed the relationship between political instability and gross domes-tic product in Turkey between 1987-2007 and asserted by means of using co-integration analy-sis that there was a long-term relationship between political instability and gross domestic prod-uct (GDP). He has also determined the presence of a unilateral causality relationship from gross domestic product towards political instability.
- Julio and Yook (2012), in their studies conducted in the whole of 48 countries, have determinedthat the companies have reduced their investments by average 4,5% prior to elections and theyhave increased their investments by average 5,4% at the end of year following the elections andthat they set forth that the political risks caused bythis structure emanatedmore specifiallyin countries with high political risk.
- Pastor and Veronesi (2013) have worked to model the reactions of investors against politicalnews in election time and as a result of these studies they have proved that investors increasetheir risk premiums in the periods of political uncertainty. Also they have revealed that this structure directly affects the market values of companies in a negative way.
- Baker et al. (2013) have formed the economic and political uncertainty index depending on thefrequency of use of predetermined words in newspapers and examined the market values ofcompanies as well as public investments based on this index. As a result of work done, theyhave found that the volatility of values of companies increases and public investments decreases in the periods when political instability increases.
- Gülen and Ion (2013), in their researches related with option agreements and political uncertain-ty at the US level, have asserted that the investors approach with further deliberationto optionswithout the right of withdrawal in the periods when political uncertainty increases. In addition,they have determined that the companies holding such options in their portfolios have been im- pressed much by political instability compared to other companies.
- Kang et al. (2014) have examined the investment decisions of companies in the political insta-bility periods. They have suggested that the companies have postponed their investment deci-sions in the short and long terms depending on change probability in public decisions. But theyhave determined in their reseraches that the companies they describe as a very big are not af- fected from this structure.
- Wang et al. (2014), in their studies conducted throughout China, have determined that the im-balances comprise in the financial structures of the companies in the election times (periodswhen political instability increases) and that they have refrained from making investment. Inaddition, they have proved that the companies whose equity capital structure is strong in theelection times, have overcome these difficulties in a more comfortable way while the companieswhose equity capital structure is weak in the election times, have had big difficulties in theseperiods. Despite the fact that the public companies receive the government support, they failed to stay out of this structure.
- Beşkaya and Ergun (2015) have researched the relationship between political structure and thepreferred exchange rates by using data of 8 countries included in the EU between 1980-2003.According to results of this research, they have determined that the floating exchange rate re-gime is further preferred when democratization ratio increases within the political structure.Alsothey have stated that political stability and transparency contribute the deepening of financial markets.
- Despite the fact that politics and economics are perceived as science fields different from eachother, economic structure is accepted as dominant factors in formation of political structure andpolitical decisions are accepted as dominant factors in formation of economic structure. It is notexpected to address separately the factors affecting too much each other.Political Economy con-cept examines two factors in question by means of addressing them at the same time (Savaş,2008: 5). Depending on the Political Economy concept, many researchers investigating the in-teraction of political instability and economic are indicated in the literature part. When the ef-fects of the political instability to the economic structure are reviewed, economic growth ratesand several political instability indicators,which are regarded as the most important indicator ofeconomic performance, have formed the most basic structure of the researches. In the studiesconducted, the presence of a significant and negative relationship between political instabilityand economic growth has been determined. Also it has been set forth that problems experiencedin the economic performance may cause to the political instabilities (Alesina et al., 1996: 1; Dimitrios and Price, 2000: 2).
- There is no consensus about what the political instability concept is. Altough quite differentdefinitions about the subject come into question, description made by Alsina et al. is mostlyused in the researches. Political instability is essentially separated into two different section;Firstly no matter what form government reshuffles and secondly social unrest and political vio-lence (Alesina and Perotti, 1996: 3; Şanlısoy and Kök, 2010: 104). Telatar and Abdiweli indi-cates in their studies that all government reshuffles don’t adversely affect the macro-economicstructure and also they state that macro-economic is not affected by the government reshuf-flescarried out in the constitutional order and social consensus. Investors take their positions byusing information estimated under usual conditions, but unexpected information shocks affectthe investors in the negative direction (Abdiweli, 2001: 97). As long as the investors can predictthe future, they continue to make their activities and if uncertainties or risks are foreseen by investors for the future periods, they turn their behaivours into a more deliberate structure.
- Political risk in the macro structure means risks that emerge depending on changes in the gov-ernment policies regardless of government reshuffles. The source of these risks is not only thegovernment reshuffles, but also these risks are stemmed from unexpected intervention of thegovernment to the market, laziness of the government and failure to eliminate the unrest in thesociety. (Friedman and Kim, 1988: 64). Political risks in the micro structure are defined as sanc-tions that are imposed by the government or different power groups to a sector or company (Mudambi and Navara, 2003: 249).
- Depending on the emergence of political risk factors; as the investors will begin to increase therate of the risk premiums on their investments against increasing risks, the costs of funds willstart to increase in the markets and the investors can stop or reduce their investments until thestructure of their risk premiums will be improved (Pastor and Veronesi, 2013: 521). Thus, ageneral discontent shall emanate in the financial markets depending on the emergence of politi-cal risks and accordingly the portfolio investments and cash flows shall be negatively affectedfrom this situation (Clark and Tunaru, 2001: 156). Depending on contraction occuring in thecash flows, the depth offinancial markets will begin to decrease and speculative behaviors in themarket will accelerate. The small investors will pull out of the financial markets in fear that theywon’t find the appropriate ratios between returns and risks. Accordingly, the reduction of theamount of funds in the financial markets will be able to cause to reduction of corporate directinvestments (Asterion and Price, 2001: 386). Due to the reduction of direct investments, thefinancial contraction may lead to macro- economic contraction. Depending on increase in thepolitical risks, another expected and identified result is that: The foreign capital inflows willdecrease, even the current foreign capital will be taken out of the country (Lensink et al.2000:87). While decline in the structure of foreign capital adversely affects the financial mar- kets, it will also affect the macro-economic performance in the medium term.
- Belgium does not have a very old history in terms of state structure. Belgium lived under thesovereignty of various nations throughout history and it was attached to France after the FrenchRevolution.In 1815, Belgium separated from France depending on the decisions of ViennaCongress and was attached to the Netherlands. After uprising beginning in Brussels in 1830,people declared its independence in the London Conference (Telci, 2012: 72). While Belgiumhas a unitary state structure from 1830 until 1970, it has turned into a federative structure uponthe insistence of the different ethnic communities in Belgium. Volan and Flaman ethnic groupshad a great influence in changing into a federative structure from a unitary structure of Belgium.More independence demands of these groups caused to make constitutional regulations firstlystarting from 1970 and subsequently in 1980, 1988, 2001 and 2011. Depending on the finalregulations made in the Constitution, there are 6 governments within federative structure. (Fed-eral Government, Flaman Government, Wallonia Government, the Government of Brussels-Capital Region, theGovernment of the French Community, the Government of German Com-munity) (Anonymous, 2016). Belgium's federative structure has two different structures: geo-graphic and cultural (Karaer, 2011: 53). While federation is composed of three separate regionsin the form of Wallonia Region, Flaman Region and Brussels-Capital Region according to geo-graphic features, federation is composed of three regions in the form of Flaman Region, FrenchRegion and Germany Region according to language and cultural region (Anonymous, 2016b).Powers of each government established in these regions are clearly described below (Anony- mous, 2016):
- Changing into a federative structure by means of separatingfrom a unitary structure has madestronger the ethnic groups in Belgium and caused to the emergence of ethnic political partiesdepending to regions specified above. It is quite a natural appearance to establish the coalitiongovernments from within multiparty system in question. In the general elections made in June2008, Flaman right-wing parties won the elections as the first party in an unexpected way andgained the right to form government. However, Yves Leterme, Flaman Christian DemocraticParty leader, has expressed that this election was a traffic accident for Belgium and he failed toform a government depending on the propaganda that Flaman people must form its own gov-ernment by separating from Federation (Karaer, 2011: 66). As several government formationefforts could not be resulted in success, it has been decided to establish a temporary governmentuntil general elections will be made. With the emergence of a similar nature in the general elec-tions held in 2010, the government could not be established during 541 days. A coalition gov-ernment was formed under the leadership of Elio Di RUPOon 6 December 2011 and he suc-ceeded to effectively govern the country until the general elections will be made in 2014. Politi-cal risks emanated due to the government reshuffle carried out by means of using the democrat-ic ways and failure to form a government in Belgium between 2011 and 2008. The financialmarkets are influenced primarily by the emergence of political risks and economic growth isadversely affected later from this situation. Based on these evidences, it is estimated that crisisexperienced in Belgium due to failure to form a government shall theoretically and primarily affect the financial markets.
- In accordance with information obtained from literature survey, the existence of a bilateral rela-tionship between political instability and economic growth has been carried out through timeseries by multiple regression models. In this study, Bel-20 index that is a basic indicator indexof Belgium exchange market will be used as the independent variable, the PRI (political riskindex) that is a political instability indicator will be used as the dependent variable and the mul-tiple regression model with single equation will be used for determining of the interaction be-tween political instability and financial markets. PRI Political Risk Group (PRS Group) is creat-ed by means of using 12 sub-components such as government stability, socioeconomic condi-tions, investment profile, internal conflicts, external conflicts, corruption, influence of the mili-tary in the political arena,the influence of religion in politics sphere, legislative regulations,ethnic tensions, democratic transparency and bureaucracy quality (Şanlısoy and Kök, 2010:108). Data such as monthly borrowing interest rate of Belgium central bank, monthly interestrate of indicator treasury bill, monthly borrowing interest rate of private sector and the amountof public debt on a monthly level have been used as financial market indicators other than dataspecified above. In addition, monthly unemployment rate and the monthly consumer price indexdata have been used as an indicator for determining the impact the political instability on macro- economic structure.
- In this model, data regarding time series and 122 data gained between 2004 and 2014 in concern with period in question will be taken into consideration on a monthly basis.
- There is unit root problem in all data out of 1pri according to ADF unit root test results andaccordingly it is understood that said data is not stationary. When ADF test is performed bymeans of taking the first differences of each variable in the data set, it is seen that all data out ofthe 1kb is stationary in the first degree. Accordingly, the presence of co-integration will be re-searched by means of removing 1kb variable from this model. JCT (Johansen Co-integrationTest) is preferred in the models where there are more than two variables (Johansen, 1998; Ya-vuz, 2015: 404). JCT has a two-stage structure and VAR model is established in the first stagebetween the variables and co-integration is sought in the scope of this model between the vec-tors in the long term. The variable should equally be stationary in order to set up VAR model. Inthis study we performed, it has been determined in advance that other variables out of lkb (pub-lic debt) were stationary in first differences. In subsequent stage, delay times of variables out of lkb have been determined and they have been presented in Table 2.
- Two different trends form according to table 5 and they come to balance in the long term. Ac-cordingly, it is accepted that the data in the financial structure has a co-integrated structure. Butthe emergence of two separate trends in the co-integrated structure is considered as an indicatorshowing that objective function vector experiences a breaking point and thisbreaking in thestructure is examined with Cusum of Square test. Cusum of Square and many similar structuralbreak tests are used to identify the vectoral breakings on regression line. Structural breakingsmay be accepted as unexpected deviations arising from political or natural events in the overallsystem (Güriş, et al., 2013: 413). When the results of Cusum of Square test in figure 11 haslooked through, it has been seen that objective function undergoes to financial breaking startingfrom 6th month of 2005 year until 8th month of 2011 year. While it is expected that financialmarkets will be affected after the general elections held Belgium in 2006 and structural breakingwill start in this period, structural breaking has started before the general election. In this case,we consider that the financial markets will predict the presence of political instability prior to general elections and take the required position in accordance with this new situation.
- When studies conducted in the past are examined, it has been understood that politics has af-fected the economic structure as well as it has been influenced by the economic.If we accept thefinancial structure as a part of macro-economic structure, it will be wrong to say that financialmarkets will not affected by the political instability. When studies conducted in the past areexamined, it has been seen that the researches have been generally carried out on developingcountries. There are no similar studies about developed countries. In this study we fulfilled,Belgium which we can accept as one of the leading countries in terms of economic and politicalstructure in the EU, has been addressed. The most important factor in the examination of Bel-gium is that: government formation efforts went through a problematic process after the generalelections held in 2006 and the political instability has emerged within elapsed time until 2011.The impact of political instability on the financial markets has been investigated and the infla-tion and unemployment values,which are considered as the indicators of macro-economic struc-ture outside of the financial markets, have also created the subject of this research. In this studywe fulfilled, co-integrated has been determined in the long term between political instabilityindex and Bel-20 index of Beligium exchange market, return rate of treasury bill, borrowing rateof central bank and borrowing rate of private sector that are accepted as financial market indica-tors. However, the objective function has experienced a structural breaking between 2006 and2011. It is believed that the reason of this breaking is the political instability emerging in deter-mined periods. A structural break in the unemployment and inflation structures within sameperiods are not available. While the political instability in Belgium affects quite a lot the finan-cial markets according to the current findings, it does not affect much the inflation structure.That macro economy decision-makers of Belgium, a member of EU, can decide without influ- encing more by political structure can be accepted as the reason of this situation.
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