Evaluating the Effects of Economic Imbalances on Gold Price in Turkey With MARS Method and Discussions on Microfinance

Abstract

Gold is not only an ornament but also used for an alternative financial instrument of microfinance in emerging economies. The purpose of this chapter is to determine the effects of economic imbalances on gold prices in Turkey as a case of emerging economies. Using the monthly data of eight relevant variables for the periods between 1995:7 and 2016:5, a new model is created by using MARS (multivariate adaptive regression splines) method in order to achieve this objective. The results show a negative relationship between gold prices with interest rate of TL and USD and increase in USD currency. The main results demonstrate that investors need the microfinance and the individual suppliers of finance could prefer gold for the financial investment or index their financial sources obtained from the individual investor according to the changes of gold prices. Furthermore, it also concludes that high inflation rates lead to increase in gold prices and mostly affect the microfinance possibilities.