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The Effect of the Macroeconomic Determinants on Sovereign Credit Rating of Turkey

Osman Nuri Aras and Mustafa Öztürk

MPRA Paper from University Library of Munich, Germany

Abstract: The effects of the main macroeconomic determinants on the sovereign credit rating of Turkey assigned by Standard & Poor’s are analyzed in this paper. As the main macroeconomic determinants, inflation rate, economic growth rate, foreign direct investment, external debt, current account debt and savings are taken into account in this study. The data related to Turkey in this study covers between 1992-2016. In this study, the Granger causality test and the OLS regression model are used for that correlations of the variables. Outcomes of the analysis show that just two in six macroeconomic determinants are effective on the sovereign credit rating. According to the results of the study, external debt and inflation rate have a statistically significant relationship with the sovereign credit rating of Turkey. The outcomes show that external debt and the inflation rate have negative effects on the sovereign credit rating of the country. The coefficient of the external debt and the inflation is negative which means that if the inflation or external debt increases the rating decreases in appropriate with the theory. On the other hand, the effects of the other four macroeconomic variables are not significant. The results of the study indicate that some factors other than the primary macroeconomic determinants are effective on the sovereign credit ratings of Turkey. The results also unveil the door for the criticism that the decisions of the credit rating agencies are biased.

Keywords: Sovereign risk; Sovereign credit rating; Credit rating agencies; Macroeconomic determinants; Turkey. (search for similar items in EconPapers)
JEL-codes: E02 F30 G20 G24 G29 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara, nep-cwa and nep-mac
Date: 2018-05-01
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Published in Journal of Management, Economics, and Industrial Organization 2.2(2018): pp. 62-75

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