The Impact of Economic Uncertainty, Exchange Rate, and Inflation Volatility on Entrepreneurial Activities in Turkey: Wavelet Coherence Analysis

Abstract

Purpose – This study aims to investigate the relationship between entrepreneurial activities and macroeconomic variables such as economic uncertainty, exchange rate volatility, and inflation volatility in Turkey for the period 2009–2024. It evaluates the potential impacts of these macroeconomic determinants on entrepreneurial decision-making processes.
Design/methodology/approach – The number of newly established legal entity companies and the number of newly established real person commercial enterprises are utilized as proxies for entrepreneurial activities. The interrelationships among the variables are analyzed using the Fourier Toda-Yamamoto (FTY) causality test in the linear domain and the Wavelet Coherence (WTC) test in the time-frequency domain. These methodologies are effective in revealing non-linear and time-varying dynamics.
Results – The FTY test did not detect any linear causality. However, the WTC analysis revealed significant periodic and frequency-dependent relationships between the macroeconomic volatility indicators and entrepreneurship. These relationships indicate that the variables can exert both short-term and long-term effects.
Discussion – The findings suggest the presence of non-stationary, time-sensitive, and frequency-dependent interactions between entrepreneurship and macroeconomic volatilities. While contemporaneous effects are prominent in the short run, the determinacy of structural factors increases in the long run.