The Effects of the Macroeconomic Determinants on Sovereign Credit Rating of Turkey

Journal of Management, Economics, and Industrial Organization, Vol.2 No.2, 2018, pp.62-75.

Posted: 24 Aug 2018

See all articles by Osman Nuri Aras

Osman Nuri Aras

Nile University of Nigeria

Mustafa Öztürk

International Trade

Date Written: May 1, 2018

Abstract

The effects of the main macroeconomic determinants on the sovereign credit rating of Turkey assigned by Standard & Poor’s are analyzed in this paper. As the main macroeconomic determinants, inflation rate, economic growth rate, foreign direct investment, external debt, current account debt and savings are taken into account in this study. The data related to Turkey in this study covers between 1992-2016. In this study, the Granger causality test and the OLS regression model are used for that correlations of the variables. Outcomes of the analysis show that just two in six macroeconomic determinants are effective on the sovereign credit rating. According to the results of the study, external debt and inflation rate have a statistically significant relationship with the sovereign credit rating of Turkey. The outcomes show that external debt and the inflation rate have negative effects on the sovereign credit rating of the country. The coefficient of the external debt and the inflation is negative which means that if the inflation or external debt increases the rating decreases in appropriate with the theory. On the other hand, the effects of the other four macroeconomic variables are not significant. The results of the study indicate that some factors other than the primary macroeconomic determinants are effective on the sovereign credit ratings of Turkey. The results also unveil the door for the criticism that the decisions of the credit rating agencies are biased.

Keywords: Sovereign Risk, Sovereign Credit Rating, Credit Rating Agencies, Macroeconomic Determinants

JEL Classification: E02, F30, G20, G24, G29

Suggested Citation

Aras, Osman Nuri and Öztürk, Mustafa, The Effects of the Macroeconomic Determinants on Sovereign Credit Rating of Turkey (May 1, 2018). Journal of Management, Economics, and Industrial Organization, Vol.2 No.2, 2018, pp.62-75. . Available at SSRN: https://ssrn.com/abstract=3231024

Osman Nuri Aras

Nile University of Nigeria ( email )

Abuja
Nigeria

Mustafa Öztürk (Contact Author)

International Trade

Istanbul
Turkey

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