DOES COUNTRY CREDIT RATING AFFECT CURRENT DEFICIT ACCOUNT: THE CASE OF TURKEY (1992-2014)

Abstract

In this study the presence and direction of the relationship between the current account deficit and credit rating index for Turkey has been tested using Gregory-Hansen co-integration test, which considers structural breaks and Toda-Yamamoto causality analysis for the period of 1992-2014. Based on the results of empirical applications, it has been concluded that both series are not stable and there is a long-term relationship between the variables. As a result of the Toda-Yamamoto method based on the Granger causality analysis, it has been determined that there is a one-way causal relationship between the variables from current account deficit towards credit rating index.

Keywords

• Account deficit; Credit rating; Gregory-Hansen co-integration test; Toda-Yamamoto causality analysis