The impact of credit rating changes on the government cost of borrowing in Turkey

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Tezin Türü: Yüksek Lisans

Tezin Yürütüldüğü Kurum: Orta Doğu Teknik Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisat Bölümü, Türkiye

Tezin Onay Tarihi: 2014

Öğrenci: MURAT GÜRER

Danışman: PINAR DERİN GÜRE

Özet:

Standard and Poor’s (S&P), Moody’s and Fitch have been producing credit ratings for government bonds and corporate bonds. Changes in credit ratings affect the investors’ decisions and government cost of borrowing as well. 2008 global financial crisis is an important milestone for the credit rating agencies since during the crisis period high rated countries faced with deep economic fluctuations which decreased the creditworthiness of these agencies. This thesis investigates the relationship between sovereign bond spreads and rating changes during the post-crisis period for Turkey. We perform vector autoregression (VAR) model including Granger causality test and impulse response functions (IRFs) analysis to investigate the effects of rating changes on the Turkish government bond spreads from July 2007 to March 2013. We also perform event study analysis in order to capture the dynamic effects of rating changes on Turkish government bond spreads. We find some evidence that rating announcement are often anticipated by the market so investors take their position before announcement day which give us insignificant results in VAR estimates.