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The Relationship Between Country Risk Premium, Loans and Macroeconomic Variables: Case of Türkiye

Author

Listed:
  • İlknur EKİNCİ
  • Aykut EKİNCİ
  • Murat Can GENÇ

Abstract

This study examines the short-term dynamic relationship between country risk premium, loans and macroeconomic variables in the Turkish economy for January 2011 - November 2021 within the framework of the VARX model. The study is one of the few studies in the literature that examines the relationship between the bank loan channel and the CDS premium for Türkiye. Moreover, it is concluded that analysing the real loan volume in terms of Turkish currency and foreign currency affects the empirical results. In addition to the CBRT policy rate, 1-month and 12-month deposit rate variables, which reflect the cost of funds of banks, are used as interest rate variables and the effect of the change in maturity risk is also included in the model. Main findings of the study: (i) Country risk premium reacts positively and significantly for the first month against inflation, exchange rate (depreciation in TL) and interest rate shock. (ii) The shock in the country's risk premium positively and significantly affects inflation, exchange rate, and interest rates during the first two months. (iii) The shock in the country risk premium has a negative effect on Turkish lira real loans for the whole response period, and the response is significant and negative in the second and third months.

Suggested Citation

  • İlknur EKİNCİ & Aykut EKİNCİ & Murat Can GENÇ, 2024. "The Relationship Between Country Risk Premium, Loans and Macroeconomic Variables: Case of Türkiye," Sosyoekonomi Journal, Sosyoekonomi Society, issue 32(60).
    • Handle: RePEc:sos:sosjrn:240217
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    Keywords

    CDS; Country Risk Premium; Loans; Banking.;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing

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