Abstract:

This paper investigates the relationship between turkish credit default swaps and exchange rates, in the period of 4th of January 2010 – 31st of August 2015 by using time series analysis. For this purpose, firstly the stationary process of variables is examined with Augmented Dickey Fuller (ADF) and Philips Peron (PP) unit root tests and it is found that the variables are stationary at first differences. Furthermore to show long run relationship between variables, Johansen Cointegration test is used and it was determined that there is no cointegration. Unrestricted VAR Model is established for the absence of cointegration between the variables. Moreover Granger Causality Test is used to confirm causality between the variables and as a result there is a directional causality relationship defined from only US Dollar/Turkish Lira representing USD time series to both Turkish Credit Default Swaps(CDS), and Euro/Turkish Lira Exchange rate at the 0.05 level of significance.

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