Is Purchasing Managers’ Index (PMI) a Leading Indicator for Stock, Bond And Foreign Exchange Markets in Turkey?

OpenAlex · English

The aim of this paper is to examine whether the PMI (Production Managers’ Index) is a leading indicator for the returns of stock, bond and foreign exchange markets in Turkey. This paper examines the causality relationship between PMI and stock, bond and foreign exchange markets. We employ Toda Yamamoto (1995) and Fourier Toda Yamamoto (2016) causality tests and data for the period spanning from December 2012 to August 2018. We find out the existence of unidirectional causality from the PMI to all these Turkish financial markets -except Food and Chemistry sub-sectors after the consideration of structural breaks. PMI is a leading indicator of foreign exchange, bond and stock markets, save the stocks traded in Food and Chemistry sub-sectors.