THE RELATIONSHIP BETWEEN ENERGY PRICES, CDS, USD CURRENCY AND INFLATION RATE IN TURKEY
THE RELATIONSHIP BETWEEN ENERGY PRICES, CDS, USD CURRENCY AND INFLATION RATE IN TURKEY

Summary/Abstract: Emerging economies are highly dependent on energy commodities in terms of both export for gaining cash inflow and import for meeting internal energy demand. Volatility of energy prices in international markets might spillover on net cash balance of individual countries due to its direct impact on foreign cash in/out flows which could increase overall fragility of countries. Developments in energy prices at international spot commodity markets directly affect Turkey because of its significant reliance on imported energy. Country’s financial and macroeconomic indicators respond instantly to developments in external factors such as commodity prices. To that end, the present paper investigates the impact response analysis between energy prices index quoted under title of “S&P GSCI Energy” derived from spot energy prices in the international markets and inflation, USD currency and sovereign CDS of Turkey by employing VAR model for the period of 2007M4-2017M1. The results show that a shock to energy prices has a negative impact on CDS and USD currency. At the same time, USD currency rate has a significant effect on the CDS and inflation.

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