Impacts of credit default swaps on volatility of the exchange rate in Turkey : the case of Euro

Muhsin Kar, Tayfur Bayat and Selim Kayhan

In this study, we aim to investigate the impacts of credit default swaps (CDS) premium as a risk financial indicator on the fluctuations of value of the Turkish lira against the Euro. We try to answer the following questions: Is the CDS premium change among the drivers of EUR/TL exchange rate and what are the possible effects of CDS premium volatility on EUR/TL exchange rate stability in different conditions? In this regard, we developed a MS-VAR regime change model and asymmetric, frequency domain and rolling windows causality analysis methods. Results obtained from all tests imply that risk premium is partially a driver of the EUR/TL exchange rate between the years 2009 and 2015.

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Year of publication:	September 2016
Authors:	Kar, Muhsin ; Bayat, Tayfur ; Kayhan, Selim
Subject:	CDS premium \| asymmetric causality \| rolling windows causality \| Türkei \| Turkey \| Kreditderivat \| Credit derivative \| Volatilität \| Volatility \| Wechselkurs \| Exchange rate \| Euro \| Kausalanalyse \| Causality analysis \| Eurozone \| Euro area

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