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Impacts of Credit Default Swaps on Volatility of the Exchange Rate in Turkey: The Case of Euro

1
Department of Economics, Yıldırım Beyazıt University, Ankara 06680; Turkey
2
Department of Economics, İnönü University, Malatya 44280, Turkey
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Department of Economics and Finance, University of New Orleans, New Orleans, LA 70148, USA
*
Author to whom correspondence should be addressed.
Academic Editor: Nikolaos Apergis
Int. J. Financial Stud. 2016, 4(3), 14; https://doi.org/10.3390/ijfs4030014
Received: 15 April 2016 / Revised: 26 May 2016 / Accepted: 31 May 2016 / Published: 1 July 2016
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. View Full-Text
Keywords: CDS premium; asymmetric causality; rolling windows causality CDS premium; asymmetric causality; rolling windows causality
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Kar, M.; Bayat, T.; Kayhan, S. Impacts of Credit Default Swaps on Volatility of the Exchange Rate in Turkey: The Case of Euro. Int. J. Financial Stud. 2016, 4, 14.

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