Does credit default swap spread affect the value of the Turkish LIRA against the U.S. dollar?

Hassan M. K., Kayhan S., BAYAT T.

BORSA ISTANBUL REVIEW, vol.17, no.1, pp.1-9, 2017 (SSCI, Scopus) identifier identifier

  • Publication Type: Article / Article
  • Volume: 17 Issue: 1
  • Publication Date: 2017
  • Doi Number: 10.1016/j.bir.2016.10.002
  • Journal Name: BORSA ISTANBUL REVIEW
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, EconLit, Directory of Open Access Journals
  • Page Numbers: pp.1-9
  • Inonu University Affiliated: Yes

Abstract

We examine possible links between CDS spreads and the value of the Turkish lira against the U.S. dollar by using the recently developed rolling window causality method as well as the Markov Switching Vector Autoregressive method. Results show that credit default swap premiums drive the value of the Turkish lira against the U.S. dollar in the post crisis period. We conclude that market risk as a part of financial risk has become an important factor in determining exchange rate fluctuations in the Turkish economy during the post-crisis period. Copyright (C) 2016, Borsa Istanbul Anonim Sirketi. Production and hosting by Elsevier B.V.