The Dynamic Structure of Financial Market Integration within the Organization of Turkic States: Evidence from TVP-VAR, TVGC, and WTC Methods

Using three sophisticated time-varying econometric techniques—TVP-VAR, Time-Varying Granger Causality (TVGC), and Wavelet Coherence Analysis (WTC)—this study examines the dynamic structure of financial market integration among the Organization of Turkic States (OTS) member and observer states. The analysis reveals a generally low and inconsistent degree of financial integration across the OTS region using weekly stock market indexes from Turkey, Kazakhstan, and Hungary for the years 2011–2025. According to the TVP-VAR results, there is little shock transmission across markets, with Kazakhstan and Turkey continuing to be net receivers and Hungary continuously functioning as a net shock transmitter. During significant global shock events, as the Covid-19 pandemic and the Russia-Ukraine War, integration momentarily improves but significantly deteriorates during more stable times. The TVGC data also demonstrate how market leadership changes over time and how causal relationships change in response to shifting geopolitical and economic circumstances. Between 2016 and 2020, domestic dynamics dominated market behavior in Turkey; but, following 2022, exposure to external forces significantly increased. While medium- and long-term frequencies show sporadic bouts of stronger co-movement, the WTC analysis shows minimal coherence at short-term frequencies, indicating that market movements are mostly driven by country-specific dynamics. Overall, the results indicate that there is a definite need for more regional financial cooperation, shock transmission is limited and transient, and financial integration among OTS countries is still in its infancy. The findings provide important implications for policymakers in designing policies aimed at strengthening financial integration and deepening regional financial cooperation within the framework of the Organization of Turkic States.