TIME SERIES ANALYSIS ON CREDIT DEFAULT SWAP (CDS) AND MARKET INDICATORS: THE CASE OF TÜRKİYE

Abstract

Regional and global cyclical fluctuations in the world economy reveal the importance of the CDS premium for developing countries such as Turkey, which has fragile macroeconomic indicators and is dependent on international funds. This study deals with the influence of some economic indicators on CDS premiums with a focus on Turkey in the period from January 2010 to March 2022. This study attempts to contribute to the literature by providing evidence from a developing country perspective and by improving the existing knowledge with recent and monthly data. The study determines possible long-run and short-run relationships between CDS premiums, and the exchange rate ($/TL), interest rates (applied to consumer loans in TL), Istanbul Stock Exchange 100 indexes, official reserves ($1,000,000), and total domestic credit volume ($) using the ARDL method and possible directions of causality using the Granger test. The general results have provided strong evidence that the exchange rate and credit volume have positive cointegration on CDS premiums, while official reserves and stock market index have a negative cointegration on CDS premiums.