Türkiye’nin CDS Primlerini Belirleyen Faktörler: Yapısal Kırılmalı Eşbütünleşme ve Asimetrik Nedensellik Analizi
Determinants of Türkiye's CDS Spreads: Structural Break Cointegration and Asymmetric Causality Analysis

Summary/Abstract: This study aims to examine the macroeconomic and financial factors influencing Türkiye’s credit default swap (CDS) risk premium. Türkiye has adopted a financing model based on external borrowing, and due to macroeconomic variables such as the current account deficit and inflation, fluctuations occur in its CDS risk premium. Analyzing the determinants of the CDS risk premium is crucial for managing the country’s borrowing costs and risk perception. However, there are limited studies in the existing literature that comprehensively address the factors affecting Türkiye’s CDS premium while considering structural breaks. This study aims to fill this gap by analyzing the dynamic relationships between the CDS risk premium and macroeconomic variables (external debt, current account deficit, CPI, and central bank reserves) as well as financial variables (BIST100 index, 2-year benchmark interest rate, and USD exchange rate). The study employs data covering the periods 2007:Q1-2022:Q2 and 2005:Q3-2022:Q3 and utilizes structural break unit root tests, the Arai-Kurozumi cointegration test, FMOLS and DOLS estimators, and the Hatemi-J asymmetric causality test. Through these methods, both long- and short-term relationships between the variables are analyzed in detail. The findings indicate that increases in external debt, CPI, and the current account deficit raise the CDS risk premium, while an increase in central bank reserves lowers it. Specifically, a 1% increase in external debt raises the CDS premium by approximately 1.7%, an increase in CPI raises it by 1.7%, and an increase in the current account deficit raises it by 0.042 units. In contrast, a 1% increase in reserves reduces the CDS premium by 0.98%. From a financial perspective, while the BIST100 index does not have a significant long-term effect on CDS, short-term negative shocks increase the risk premium. Additionally, a 1% increase in interest rates raises the CDS premium by 0.3%, while a 1% increase in the exchange rate raises it by 0.4%. These results indicate that Türkiye’s CDS risk premium is particularly sensitive to macroeconomic indicators such as external debt, CPI, and the current account deficit. At the same time, strengthening central bank reserves is found to be a crucial factor in reducing the country’s risk perception. The study's findings provide important implications for policymakers. To lower the CDS premium and borrowing costs, it is recommended to implement savings policies that reduce the need for external borrowing, apply effective monetary policies to control inflation, and strengthen central bank reserves. In this context, this study aims to contribute to the policy-making process by analyzing the macroeconomic and financial factors affecting Türkiye’s CDS risk premium.

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