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Sovereign Risk and Local Currency Lending Rates: Evidence from Five OECD Countries

Selcuk Gul

CBT Research Notes in Economics from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: [EN] This study aims to identify the role played by the sovereign risk in determining the local currency lending rates to the non-financial sector. In this context, lending rate equations for five emerging countries that are members of the Organisation for Economic Cooperation and Development (OECD) are estimated by the Autoregressive Distributed Lag (ARDL) model. The findings indicate that the impact of sovereign risk on lending rates varies among countries. While an increase in the sovereign risk premium leads to a significant rise in the local currency lending rates in Türkiye, its impacts on the lending rates are relatively low in Poland and Mexico and almost negligible in Hungary and Chile. Results imply that, in the case of Türkiye, as the decline in the risk premium, accompanying the monetary tightening policy initiated in June 2023, become permanent, it may have a reducing effect on the financing costs of the non-financial sector in the medium-to-long term. [TR] Bu calisma, finansal olmayan sektore verilen yerli para cinsiden kredi faizlerinin belirlenmesinde ulke riskinin oynadigi rolu ortaya koymayi amaclamaktadir. Bu cercevede, Ekonomik Kalkinma ve Isbirligi Teskilati (OECD) uyeleri arasindan secilmis bes gelismekte olan ulke icin kredi faizi denklemleri Otoregresif Gecikmesi Dagitilmis (ARDL) modeli ile tahmin edilmektedir. Bulgular, ulke riskinin kredi faizleri uzerindeki etkisinin ulkeler arasinda degiskenlik gosterdigine isaret etmektedir. Ulke risk primindeki artis finansal olmayan sektore verilen yerli para cinsinden kredi faizlerini Turkiye ekonomisinde onemli oranda artirirken, Polonya ve Meksika'da soz konusu artisin kredi faizleri uzerindeki etkisinin daha zayif, Macaristan ve Sili’de ise neredeyse ihmal edilebilir duzeyde oldugu gorulmektedir. Sonuclar, Turkiye ozelinde, 2023 yilinin haziran ayinda uygulanmaya baslanan parasal sikilastirma politikasina eslik eden risk primindeki dususun kalici hale gelmesiyle, orta ve uzun vadede finansal olmayan sektorun finansman maliyetlerini azaltici etkide bulunabilecegini ima etmektedir.

Date: 2024
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-fmk, nep-ifn and nep-tra
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