Abstract:

The aim of this study is to evaluate the relationship between Turkey's Credit Default Swap (CDS) premiums and the USD and Euro exchange rates. In order to measure this relationship, time series analyses were used for the period January 3rd, 2005 to December 31st, 2019. Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests were performed for stationarity tests. Then, Johansen cointegration analysis was used to determine long-term relationships. The vector error correction model was used to determine short-term relationships, and the Granger causality test was used to determine causality directions. CDS was used as the dependent variable, and the USD and EURO exchange rates were used as the independent variables. As a result of the study, it was found that the USD rate and EURO rate variables have a long-term relationship with CDS. CDS increases by 38.8% when the USD rate increases by 1%, and CDS increases by 24.2% when the Euro rate increases by 1%. When we look at the coefficient values, it is seen that the effect of the USD rate on CDS is higher compared to that of the Euro rate. In addition, a bidirectional causality relationship was found between the variables.

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