THE RELATIONSHIP BETWEEN THE FINANCIAL SERVICES CONFIDENCE INDEX, CREDIT DEFAULT SWAP AND THE BIST SERVICES INDEX: AN EMPIRICAL ANALYSIS

The financial services sector is a cornerstone of economic growth, with confidence indices and risk premiums serving as key indicators of market dynamics. The Financial Services Confidence Index (FSCI) and Credit Default Swap (CDS) premiums reflect risk perception and investor expectations, while the Borsa Istanbul Services Index (XUHIZ) is an important gauge of Türkiye’s services sector performance and its link to financial markets. This study examines the relationship between the FSCI, CDS premiums, and XUHIZ using monthly data from August 2012-when the FSCI was first published-through February 2025. The analysis employs the symmetric causality test of Hacker and Hatemi-J (2006) and the asymmetric causality test of Hatemi-J (2012). Stationarity tests and optimal lag length selection were conducted prior to analysis. The symmetric causality test found no statistically significant causal relationships among the variables. However, the asymmetric causality test revealed that the effects of the FSCI and CDS premiums on XUHIZ differ across components. These findings suggest that while there is no direct causality between the FSCI and the BIST Services Index, indirect effects emerge through specific shocks.