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Multi-scale interactions between Turkish lira exchange rates and sovereign CDS in Europe and Asia

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  • Chang Liu
  • Jianping Li
  • Xiaolei Sun
  • Jianming Chen

Abstract

This article examined the multi-scale correlations between Turkish lira exchange rates and sovereign credit default swap (CDS) in Turkey, Europe, and Asia by implementing a combined quantile regression (QR) and wavelet approach. The results showed that a severe depreciation of the lira will increase the sovereign risk in Turkey at different time scales. In addition, the results revealed stronger and quicker responses from Asia’s sovereign CDS than Europe’s to the shocks of the lira, which provides important implications for Asian countries and especially Asian emerging markets to prevent external risk contagion and guide the domestic monetary policy.

Suggested Citation

  • Chang Liu & Jianping Li & Xiaolei Sun & Jianming Chen, 2021. "Multi-scale interactions between Turkish lira exchange rates and sovereign CDS in Europe and Asia," Applied Economics Letters, Taylor & Francis Journals, vol. 28(7), pages 599-607, April.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:7:p:599-607
    DOI: 10.1080/13504851.2020.1765961
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    Cited by:

    1. Huang, Wei-Qiang & Liu, Peipei, 2023. "Cross-market risk spillovers among sovereign CDS, stock, foreign exchange and commodity markets: An interacting network perspective," International Review of Financial Analysis, Elsevier, vol. 90(C).

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