{"title":"The determinants of Turkish CDS volatility: An ARDL approach covering COVID period","authors":"Onur Sunal, Filiz Yağcı","doi":"10.1016/j.qref.2024.101887","DOIUrl":null,"url":null,"abstract":"<div><p>The accuracy of CDS premiums has been questioned in many former studies. However, we intend to show that the volatilities of these spreads rather than their basis point levels indicate and signal the status of sovereign risk and credit worthiness as they tend to reveal sudden deteriorations in key sovereign and global economic indicators. In that respect we aim to reveal the determinants of Turkish CDS spread volatility by using an ARDL Bounds Test framework. In line with our expectations exchange rate, stock market indice and oil price volatility have significant positive coefficients in the long run whereas US 10-year bond spreads have short run effects up to three lags. Also, our results show that COVID pandemic has remarkably increased Turkish CDS volatility. Moreover, the unorthodox monetary policies adopted after COVID has also raised CDS volatility with persistently high spread levels where a long-term memory effect was prevalent.</p></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"97 ","pages":"Article 101887"},"PeriodicalIF":2.9000,"publicationDate":"2024-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Quarterly Review of Economics and Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1062976924000930","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
引用次数: 0
Abstract
The accuracy of CDS premiums has been questioned in many former studies. However, we intend to show that the volatilities of these spreads rather than their basis point levels indicate and signal the status of sovereign risk and credit worthiness as they tend to reveal sudden deteriorations in key sovereign and global economic indicators. In that respect we aim to reveal the determinants of Turkish CDS spread volatility by using an ARDL Bounds Test framework. In line with our expectations exchange rate, stock market indice and oil price volatility have significant positive coefficients in the long run whereas US 10-year bond spreads have short run effects up to three lags. Also, our results show that COVID pandemic has remarkably increased Turkish CDS volatility. Moreover, the unorthodox monetary policies adopted after COVID has also raised CDS volatility with persistently high spread levels where a long-term memory effect was prevalent.
期刊介绍：
The Quarterly Review of Economics and Finance (QREF) attracts and publishes high quality manuscripts that cover topics in the areas of economics, financial economics and finance. The subject matter may be theoretical, empirical or policy related. Emphasis is placed on quality, originality, clear arguments, persuasive evidence, intelligent analysis and clear writing. At least one Special Issue is published per year. These issues have guest editors, are devoted to a single theme and the papers have well known authors. In addition we pride ourselves in being able to provide three to four article "Focus" sections in most of our issues.
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