Article: Nexus between credit default swap spreads and foreign exchange rates: evidence from BRICST, E7, MINT and Fragile Five countries Journal: Global Business and Economics Review (GBER) 2023 Vol.29 No.3 pp.380 - 403 Abstract: The study investigates the nexus between credit default swap (CDS) spreads and foreign exchange (FX) rates in leading emerging countries, most of which CDS spreads are high and volatile. In this context, six leading emerging countries are included, daily data between October 8, 2004 and July 23, 2021 is used, nonlinear econometric models such as wavelet coherence (WC), Granger causality in quantiles (GCQ), and quantile-on-quantile regression (QQR) approaches are applied, and quantile regression (QR) is performed for robustness checks. The WC results show that there is bidirectional nexus between the CDS spreads and the FX rates. While the CDS spreads drive the FX rates until 2012, the FX rates drive the CDS spreads after this date. Also, the GCQ and QQR outcomes present that the nexus exists in almost all quantiles excluding middle quantiles (0.35, 0.40, 0.45, 0.50) and the highest quantile (0.95) for some countries whereas country-based results change. Inderscience Publishers - linking academia, business and industry through research

Title: Nexus between credit default swap spreads and foreign exchange rates: evidence from BRICST, E7, MINT and Fragile Five countries

Authors: Mustafa Tevfik Kartal; Serpil Kılıç Depren; Özer Depren

Addresses: Borsa İstanbul Strategic Planning, Financial Reporting, and Investor Relations Directorate, Reşitpaşa Mahallesi Borsa İstanbul Caddesi No. 4, 34467 Sarıyer, Istanbul, Turkey; Adnan Kassar School of Business, Lebanese American University, Beirut, Lebanon ' Department of Statistics, Yildiz Technical University, Davutpaşa Campus, Davutpaşa Mahallesi Davutpaşa Caddesi 34220 Esenler, Istanbul, Turkey ' Customer Experience Research Lab., Yapı Kredi Bank, Çamlık Caddesi No. 1, 34330 Beşiktaş, Istanbul, Turkey

Abstract: The study investigates the nexus between credit default swap (CDS) spreads and foreign exchange (FX) rates in leading emerging countries, most of which CDS spreads are high and volatile. In this context, six leading emerging countries are included, daily data between October 8, 2004 and July 23, 2021 is used, nonlinear econometric models such as wavelet coherence (WC), Granger causality in quantiles (GCQ), and quantile-on-quantile regression (QQR) approaches are applied, and quantile regression (QR) is performed for robustness checks. The WC results show that there is bidirectional nexus between the CDS spreads and the FX rates. While the CDS spreads drive the FX rates until 2012, the FX rates drive the CDS spreads after this date. Also, the GCQ and QQR outcomes present that the nexus exists in almost all quantiles excluding middle quantiles (0.35, 0.40, 0.45, 0.50) and the highest quantile (0.95) for some countries whereas country-based results change.

Keywords: CDS spreads; FX rates; emerging countries; nonlinear approaches.

DOI: 10.1504/GBER.2023.133288

Global Business and Economics Review, 2023 Vol.29 No.3, pp.380 - 403

Received: 17 Apr 2022
Accepted: 15 Jul 2022
Published online: 11 Sep 2023 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article

Title: Nexus between credit default swap spreads and foreign exchange rates: evidence from BRICST, E7, MINT and Fragile Five countries

Keep up-to-date