Open AccessHow the macroeconomic conditions and the global risk factors affect sovereign CDS spreads? New Evidence from Turkey
Author(s) -
Sinem Pınar Gürel
Publication year - 2021
Publication title -
business and management studies: an international journal
Language(s) - English
Resource type - Journals
ISSN - 2148-2586
DOI - 10.15295/bmij.v9i2.1800
Subject(s) - endogeneity , monetary economics , exchange rate , economics , index (typography) , risk appetite , volatility (finance) , stock market index , sovereignty , sovereign credit , stock market , credit risk , international economics , financial economics , credit default swap , econometrics , risk management , finance , paleontology , horse , world wide web , computer science , biology , politics , law , political science
This paper aims to investigate the effects of a set of major country-specific macroeconomic variables and global risk factor on determining Turkey’s sovereign CDS spreads. The industrial production index, consumer price index, nominal exchange rates, policy interest rate, stock market index, and the volatility index as a proxy for global risk appetite are used by employing SVAR methodology with block exogeneity for 2011M01-2020M09 periods. The results reveal that the country's nominal exchange rate is the main driver of sovereign CDS spread. Especially in 2018, the most significant source of the high increase in sovereign CDS spreads is the exchange rates. According to the impulse response functions, to reduce the sovereign CDS spread, economic growth is more effective than the stock market return. Moreover, it is seen that the global risk factor does not play an essential role in the increases in domestic country's sovereign CDS spread.