One of the key components of political stability is relations with institutions, which refers to the relationships between the government and higher judicial organ, government and presidency, government and military bureaucracy, government civil bureaucracy and independent economic institutions, and relations with international institutions. The importance of institutions for economic development and stability has been thoroughly discussed by both the old and new schools of institutional economics, who developed theses against the Classical and Neo-Classical paradigms. In the study, we utilized VAR-VECH-TARCH models to understand spillover effects between our newly introduced Institutional Interaction Index (II), markets return (BIST 100, FX), and risks (CDS). The Institutional Interaction Index, the novelty of this paper, was obtained from data published daily by S. Bilişim. According to the results especially in the long-term spillover exists between all variables. The results from this study support institutionalist approaches. As the relations with institutions deteriorate, BIST100 and FX rate volatilities, that is, instability, increases due to the increase in market risks.

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Purpose This paper aims to focus on the absence of a direct criterion for the ideal level of net working capital (NWC) for which Acikgoz (2014) theoretically demonstrates that this NWC can be treated in a manner that allows the assessment of repayments. The study presents and discusses a new multiplier (i.e. the afa coefficient), defined as the ratio of cash equivalents ratio to NWC, measured as the percentage of short-term liabilities (Acikgoz, 2014). In other words, the study explores whether NWC could be an indicator of the ratios of corporate short-term bank credit to STL and of bank credit to total assets. Design/methodology/approach Sectoral panel regressions are used in the case of Turkey, spanning the period 1996-2013, on data obtained from the Central Bank of Turkey. Through second-generation panel unit root tests for cross-section dependence and panel cointegration methodologies, the results illustrate the statistical significance of the CD statistics, indicating the presence of cross dependence, the presence of non-stationary variables and the presence of a long-run association for the variables under study. Findings The findings document that a transformed variable of NWC is more substantive than the explicatory quality of the current ratio and may potentially be used in the prediction of bank credit in corporate liabilities. Originality/value The afa coefficient shows the ratio of liquid assets to NWC as a percentage of STL. The results illustrate that this coefficient plays a significant role for corporate bank credit usage in the case of the Turkish sectoral analysis.