The Impact of Credit Default Swaps (CDS) on Foreign Direct and Portfolio Investment: The Case of Turkey

Şener İlter and Remzi Gök
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Şener İlter: Anadolu University
Remzi Gök: Dicle University

Journal of Finance Letters (Maliye ve Finans Yazıları), 2021, vol. 36, issue Special2, 233-252

Abstract: This paper investigates the effect of credit default swaps (CDS) on foreign direct (FDI) and portfolio investments (FPI) by using quarterly observations during the period 2005Q4-2019Q3 in Turkey. The findings indicate the changes in CDS correlate negatively with the FDI and FPI while the correlation coefficient between the last two variables is significantly positive at the 1% level. The changes in FDI Granger-cause the movements in CDS with no reverse direction. The test, however, detects a bidirectional causal relationship between the changes in FPI and CDS. The results yield important imlications for sustainable financial stability and economic growth for policymakers.

Keywords: CDS; FDI; FPI; Fourier Causality (search for similar items in EconPapers)
JEL-codes: F32 G11 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:acc:malfin:v:36:y:2021:i:special2:p:233-252

DOI: 10.33203/mfy.844208

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