Re-visiting exchange rate volatility – risk perception relation. New evidence from Fourier tests

Abstract

It is essential to predict what the exchange rate will be in the future. There are several factors affecting value of national currency of an economy. One of them is risk perception and after the end of “Quantitative Easing” program by Federal Reserve, risk perception for emerging market economies has changed. In this study, we aim to analyze interaction between credit default swap premium as a risk indicator and exchange rate in the Turkish economy after the global finance crisis. Results imply that risk perception has essential effects on the value of Turkish lira against U.S. dollar and to reduce volatility in the value of Turkish lira, risk perception has to be decreased.

Keywords

• turkish lira
• fourier causality
• credit default swap premium
• exchange rate volatility
• risk perception