Impacts of Credit Default Swaps on Volatility of the Exchange Rate in Turkey: The Case of Euro


KAR M., BAYAT T. , Kayhan S.

INTERNATIONAL JOURNAL OF FINANCIAL STUDIES, cilt.4, 2016 (ESCI İndekslerine Giren Dergi) identifier

  • Cilt numarası: 4 Konu: 3
  • Basım Tarihi: 2016
  • Doi Numarası: 10.3390/ijfs4030014
  • Dergi Adı: INTERNATIONAL JOURNAL OF FINANCIAL STUDIES

Özet

In this study, we aim to investigate the impacts of credit default swaps (CDS) premium as a risk financial indicator on the fluctuations of value of the Turkish lira against the Euro. We try to answer the following questions: Is the CDS premium change among the drivers of EUR/TL exchange rate and what are the possible effects of CDS premium volatility on EUR/TL exchange rate stability in different conditions? In this regard, we developed a MS-VAR regime change model and asymmetric, frequency domain and rolling windows causality analysis methods. Results obtained from all tests imply that risk premium is partially a driver of the EUR/TL exchange rate between the years 2009 and 2015.