Abstract:

This study examines the short-term dynamic relationship between country risk premium, loans and macroeconomic variables in the Turkish economy for January 2011 - November 2021 within the framework of the VARX model. The study is one of the few studies in the literature that examines the relationship between the bank loan channel and the CDS premium for Türkiye. Moreover, it is concluded that analysing the real loan volume in terms of Turkish currency and foreign currency affects the empirical results. In addition to the CBRT policy rate, 1-month and 12-month deposit rate variables, which reflect the cost of funds of banks, are used as interest rate variables and the effect of the change in maturity risk is also included in the model. Main findings of the study: (i) Country risk premium reacts positively and significantly for the first month against inflation, exchange rate (depreciation in TL) and interest rate shock. (ii) The shock in the country's risk premium positively and significantly affects inflation, exchange rate, and interest rates during the first two months. (iii) The shock in the country risk premium has a negative effect on Turkish lira real loans for the whole response period, and the response is significant and negative in the second and third months.

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