The Impact of The Inflationary Process Based On 2023 Tax Policies in Türkiye on Borsa Istanbul (Istanbul Stock Exchange)
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https://doi.org/10.5281/zenodo.17014129Keywords:
Tax Policies, Inflation, Stock Prices, Tax Induced Inflation, Tax Pushed Inflation.Abstract
While tax-induced inflation refers to demand-side inflation after tax increases, tax-push inflation refers to cost-side inflation after indirect tax increases. This study aims to analyse the impact of inflationary shocks caused by the new tax policies enacted in Türkiye after the 2023 elections on stock prices in Borsa Istanbul. Within the scope of the research, various econometric methods such as the Kolmogorov-Smirnov test, the time-varying Granger causality test, the robust regression model FLS-MATRIX method, the impulse-response analysis, and the historical decomposition were applied using monthly data for the period 2006-2024. According to the results of the Kolmogorov-Smirnov test, it is noteworthy that there are significant distributional changes in stock prices in the period after the regulations regarding the new tax policies that started to take effect in June 2023. While the time-varying Granger causality test reveals that total tax revenues have become a determinant factor on the BIST-100 index, analyses with the FLS-MATRIX method indicate that the increase in total taxes, direct taxes, and especially indirect taxes increases the volatility in stock prices through cost inflation. On the other hand, impulse-response analysis and historical decomposition results show that the initially positive effect of tax-induced inflationary shocks on stock prices weakens over time, and the market adapts to the new tax regime. The study's results show how important it is to make changes that are predictable and occur cautiously in order to deal with how tax policies affect investor expectations and market volatility. The results also show that pricing new financial information in the markets based on taxes makes the markets work more efficent. On the other hand, the results also show that shocks based on taxes cause inflation on both the supply and demand sides. This result shows that tax-induced and pushed inflation are valid during the research period. Also, these two types of tax-based inflation had an overall impact on stock prices.
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