Abstract:

Today there are certain main indicators that allow the country to be informed about the macroeconomic structure and developed by internationally renowned organizations. Credit Rate Exchange (CDS) is one of these indicators and is an important tool that allows countries to see credit risk. According to this, countries with high CDS premiums are considered risky in terms of international capital investments. However, the low CDS premiums indicate that the country has a lower risk. The literature has been thoroughly studied what are the macroeconomic variables affecting the CDS. Especially due to the increasing economic weights of developing countries, the question of what variables affect their CDS primes has become more important. This study has studied what the domestic and global variables affecting the CDS primes of Turkey. For this purpose, the 2005Q2-2018Q4 period was analyzed by the ARDL border test approach. According to the analysis findings, the local variables affecting the CDS primes of Turkey are real interest rates, BIST100 index returns, currency transactions balance, portfolio investments in the country and inflation rates. Global variables affecting CDS primes are VIX, MSCI-Europe index, Fed interest rates, oil prices and US economic/monetary policy uncertainty.

Abstract:

Nowadays, there are certain indicators developed by internationally respected institutions that allow to be informed about the macroeconomic structure of countries. Credit default swaps (CDS) are one of the indicators, which is an important tool for the credit risk of the countries. Accordingly, countries with high CDS spreads are considered to be at risk in terms of international capital investments. However, low CDS premiums indicate a lower risk for the country. In the literature, the macroeconomic variables affecting CDS were investigated extensively. Especially, depending on the increasing economic weights of developing countries, the variables that affect their CDS spreads have gained more importance. This is affecting Turkey's CDS spreads domestic and global variables were examined in the research that is going on. For this purpose, the period of 2005Q2-2018Q4 was analysed with ARDL bound testing approach. According to the analysis findings, local variables affecting Turkey's CDS spreads, real interest rates, BIST100 index returns, the current account balance, portfolio investments to the country and the inflation rate. Global variables affecting CDS spreads are VIX, MSCI-Europe index, FED interest rates, oil prices and US economic / monetary policy uncertainties.

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