Does credit default swap spread affect the value of the Turkish LIRA against the U.S. dollar?

M. Kabir Hassan, Selim Kayhan and Tayfur Bayatb

Borsa Istanbul Review, 2017, vol. 17, issue 1, 1-9

Abstract: We examine possible links between CDS spreads and the value of the Turkish lira against the U.S. dollar by using the recently developed rolling window causality method as well as the Markov Switching Vector Autoregressive method. Results show that credit default swap premiums drive the value of the Turkish lira against the U.S. dollar in the post crisis period. We conclude that market risk as a part of financial risk has become an important factor in determining exchange rate fluctuations in the Turkish economy during the post-crisis period.

Keywords: CDS premium; MS-VAR; Rolling window causality; Exchange rate (search for similar items in EconPapers)
JEL-codes: F31 G10 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bor:bistre:v:17:y:2017:i:1:p:1-9

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