THE RELATIONSHIP BETWEEN EXCHANGE RATES, INTEREST RATES, AND RISK IN TURKEY


Güriş B. , İçen H.

in: CURRENT METHODS AND APPLICATIONS IN ECONOMETRICS (IN HONOR OF PROF. DR. AHMET M. GÖKÇEN), Prof. Dr. Nilgün ÇİL, Editor, İstanbul Üniversitesi Yayınevi, İstanbul, pp.267-278, 2021

  • Publication Type: Book Chapter / Chapter Research Book
  • Publication Date: 2021
  • Publisher: İstanbul Üniversitesi Yayınevi
  • City: İstanbul
  • Page Numbers: pp.267-278
  • Editors: Prof. Dr. Nilgün ÇİL, Editor

Abstract

Following the 2008 global financial crisis, the CDS premium, which reflects the credit risk of countries, has been one of the important indicators. The CDS premium is a type of contract that allows the risk to be passed on to someone else and is a widely used instrument in derivative markets. CDS premium, which can be expressed as credit insurance, is very important for managing and controlling the credit risk of a country or company. Changes in CDS premiums have got direct and/or indirect effects on many indicators of the economy in fragile countries such as Turkey. CDS premium is also affected by the change in these variables. An increase in the risk premium is reflected in the exchange rates, and the interest rate must be increased in order to ensure the stability of the exchange rates. However, there may be cases where such relations are not seen as a direct one-way relationship with a direct transition mechanism. The current account deficit is expected to be affected by the relationship between interest and exchange rates in the face of rising risks when foreign borrowing is used to finance this deficit. Increasing risks may affect the exchange rate. As a result of the increase in risk, it may become necessary to pay higher interest rates to lenders in order to continue to use borrowing in financing. Knowing the form and direction of the relationship between interest rates, exchange rates and CDS premiums is an important issue in terms of implementing appropriate policies and ensuring macro financial stability. In the literature, the relationships between these variables have been discussed with different methods for different time periods. In this study, the relationship between interest rate, exchange rate and CDS premium in Turkish economy of Turkey, have been investigated using non-linear causality analysis unlike the majority of the applied studies. The main method used to determine the direction of relationships between variables in time series analysis is the causality analysis put forward by Granger (1969) for the first time. The linear Granger causality test gives misleading results if the relationships between the series are not linear. In the linear Granger causality test, nonlinear relationships between the series cannot be modeled. In the study, the nonlinear Granger causality test developed by Diks and Panchenko (2006) will be used to examine the nonlinear causality relationship between the series. The null hypothesis in this test expresses the absence of non-linear Granger causality. The non-linear causality test developed by Diks and Panchenko (2006) is a non-parametric test. This test is based on the residues of the vector autoregressive (VAR) model to eliminate possible linear dependence. A nonlinear finding obtained from residues will be used as the mainstay of the test. In this study, the presence of nonlinear relationship was investigated by using the test developed in the Brock, Dechert and Scheinkman (1987) (BDS) study. In the BDS test results applied to the error terms of the models used in this context, it was determined that the relationships between the variables were not linear. According to the results of nonlinear causality, there was no causal relationship between exchange rate and CDS and interest rate and exchange rate variables, but mutual causality was obtained between interest rate and CDS.

Kredi temerrüt takası, bir yatırımcının kredi riskini başka bir yatırımcı ile takas etmesine imkân sağlayan finansal bir tür araç ya da sözleşme olarak tanımlanabilmektedir. CDS primleri özellikle kriz dönemlerinde firmaların ya da ülkelerin borç-alacak ilişkisinde kendilerini güvence altına almalarında kullanılan bir türev araç olarak da tanımlanabilmektedir. Ülkelerin kredi riskinin önemli göstergelerinden biri olan CDS özellikle 2008 küresel finansal krizden sonra önemi anlaşılmıştır. CDS primlerini etkileyen pek çok iktisadi değişken bulunmaktadır. Aynı zamanda CDS primlerinin yükselmesi ya da düşmesi de ülkedeki pek çok iktisadi değişkeni etkilemektedir. Dolayısıyla bu değişkenler arasındaki birbirini besleyen bir ilişki de olabilmekte veya birisi diğerinin sonucu / nedeni olabilmektedir. Ayrıca bu ilişkileri doğrusal bir yapı ile tanımlamak ve analiz etmek de mümkün olmamaktadır. Hatta çoğu zaman bu ilişkiler doğrusal olmayan bir yapı ile karşımıza çıkmaktadır. Türkiye’de döviz kuru ve faiz ilişkisi oldukça popüler bir konudur. Döviz kuru düzeyi ve faiz oranları da risk priminin etkisi altında şekillenmektedir. Dolasıyla bu değişkenler arasındaki uzun dönemli ilişkilerin ve nedensellik ilişkilerinin bilinmesi ekonomi politikaları kararlarının alınmasında etkili olacaktır. Bu çalışmada da söz konusu değişkenler arasındaki doğrusal ve doğrusal olmayan nedensellik testleri ile analiz edilmektedir. Elde edilen bulgulara göre döviz kuru ve CDS arasında nedensellik ilişkisi bulunamamıştır. Ancak faiz oranı ve CDS arasında iki yönlü nedensellik ilişkisi bulunmaktadır