Credit rating changes and the government cost of borrowing in Turkey

Download

801-5185-1-PB.pdf

Date

2016-8

Author

Gürer, Murat
Derin Güre, Pınar

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

287
views

181
downloads

Standard and Poor’s (S&P), Moody’s and Fitch have been producing credit ratings for government bonds and corporate bonds. Changes in credit ratings affect the investors’ decisions and government cost of borrowing as well. 2008 global financial crisis is an important milestone for the credit rating agencies since during the crisis period high rated countries faced with deep economic fluctuations, which decreased creditworthiness of these agencies. This paper investigates the relationship between sovereign bond spreads and rating changes during the post-crisis period for Turkey. The relationship between credit rating/outlook changes and cost of borrowing in Turkey has not been investigated in an academic paper before. Therefore we perform vector autoregression (VAR) model including Granger causality test and impulse response functions (IRFs) analysis to investigate the effects of rating changes on the Turkish government bond spreads from July 2007 to March 2013. We also apply event study analysis in order to capture the dynamic effects of rating changes on Turkish government bond spreads. This analysis gives some evidences that rating announcements are often anticipated by the market so investors take their position before announcement day, which leads to insignificant results in VAR estimates.

Subject Keywords

Credit rating, Government borrowing, Vector autoregression, Event study, Market anticipation

URI

http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/801
https://hdl.handle.net/11511/58194

Journal

ODTÜ Gelişme Dergisi

Collections

Department of Economics, Article

Suggestions

OpenMETU
Core

Credit rating changes and the government cost of borrowing in Turkey Derin Güre, Pınar ( Department of Economics Middle East Technical University , 2016-08-01) Standard and Poor’s (S&P), Moody’s and Fitch have been producing credit ratings for government bonds and corporate bonds. Changes in credit ratings affect the investors’ decisions and government cost of borrowing as well. 2008 global financial crisis is an important milestone for the credit rating agencies since during the crisis period high rated countries faced with deep economic fluctuations, which decreased creditworthiness of these agencies. This paper investigates the relationship between sovereign bo...
The Impact of credit rating changes on the government cost of borrowing in Turkey Gürer, Murat; Derin Güre, Pınar; Department of Economics (2014) Standard and Poor’s (S&P), Moody’s and Fitch have been producing credit ratings for government bonds and corporate bonds. Changes in credit ratings affect the investors’ decisions and government cost of borrowing as well. 2008 global financial crisis is an important milestone for the credit rating agencies since during the crisis period high rated countries faced with deep economic fluctuations which decreased the creditworthiness of these agencies. This thesis investigates the relationship between sovereig...
Credit Risk Market and the Recent Loan Profile in the Turkish Banking Sector Özdemir, Özlem (2009-05-01) Very little research has been done on the financial stability implications of credit risk transfer markets. In particular there is a paucity of work considering the interactions between the various credit risk transfer markets or instruments. Regarding credit derivatives, the small number of existing studies can be explained by a lack of quantitative data and by the brief history of the market" (Kiff et al., 2002, page 2). This paper tries to explain the development of credit risk transfer instruments and h...
EXAMINATION OF BOND RISK PREMIA FROM THE BANKING PERSPECTIVE Orhan, Selim; Danışoğlu, Seza; Department of Financial Mathematics (2022-5-10) Banks are considered as the marginal and sophisticated investors of financial markets. This is evident in the Haddad and Sraer (2020) study that examines the US government bond excess returns. This study extends the Haddad/Sraer analysis to the Turkish government bond market. According to the forecasting results, exposure ratio provides explanatory power over bond excess returns, especially for longer maturities. On the other hand, output gap and industrial growth present strong in-sample forecasting power ...
Modeling correlation structure for collateralized debt obligations and determining the underlying credit default swap spread equations İlalan, Deniz; Hayfavi, Azize; Omay, Tolga; Department of Financial Mathematics (2015) Pricing complex financial derivatives such as collateralized debt obligations (CDOs) is considered as the main reason triggering the 2008 financial crisis. The correlation structure related to the credit risks involved in a portfolio for pricing issues have been tried to overcome via a Gaussian copula framework first introduced by David Li. This approach regards the correlation among the credit risks as normally distributed, enabling us to derive analytical solutions. However, despite its simplicity, this G...

Citation Formats

M. Gürer and P. Derin Güre, “Credit rating changes and the government cost of borrowing in Turkey,” ODTÜ Gelişme Dergisi, vol. 43, no. 2, pp. 507–547, 2016, Accessed: 00, 2020. [Online]. Available: http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/801.