Hierarchical structures of correlations networks among Turkey's exports and imports by currencies


PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS, vol.391, no.24, pp.6509-6518, 2012 (SCI-Expanded) identifier identifier


We have examined the hierarchical structures of correlations networks among Turkey's exports and imports by currencies for the 1996-2010 periods, using the concept of a minimal spanning tree (MST) and hierarchical tree (FIT) which depend on the concept of ultrametricity. These trees are useful tools for understanding and detecting the global structure, taxonomy and hierarchy in financial markets. We derived a hierarchical organization and build the MSTs and HTs during the 1996-2001 and 2002-2010 periods. The reason for studying two different sub-periods, namely 1996-2001 and 2002-2010, is that the Euro (EUR) came into use in 2001, and some countries have made their exports and imports with Turkey via the EUR since 2002, and in order to test various time-windows and observe temporal evolution. We have carried out bootstrap analysis to associate a value of the statistical reliability to the links of the MSTs and HTs. We have also used the average linkage cluster analysis (ALCA) to observe the cluster structure more clearly. Moreover, we have obtained the bidimensional minimal spanning tree (BMST) due to economic trade being a bidimensional problem. From the structural topologies of these trees, we have identified different clusters of currencies according to their proximity and economic ties. Our results show that some currencies are more important within the network, due to a tighter connection with other currencies. We have also found that the obtained currencies play a key role for Turkey's exports and imports and have important implications for the design of portfolio and investment strategies. (C) 2012 Elsevier B.V. All rights reserved.