Asymmetric Effect of Globalization on the Interest Rates on External Debt: The Case of Turkey

This study empirically examines the short-run and long-run asymmetry between the series of globalization and the interest rate on external debt for the years from 1970 to 2015 for Turkey by employing the Nonlinear Auto-Regressive Distributed Lag (NARDL) model. Estimation results show that there is a statistically significant nonlinear relationship between globalization and the interest rate on external debt for the case of Turkey. We identified a long-run but not a short-run asymmetry between two series. According to the findings, when the degree of globalization in Turkey increases by 1%, then the interest rate on the external debt commitments drops by 3.43%. On the other hand, the interest rate on external debt commitments rises by 3.07% in the long-run when the degree of globalization drops by 1%. Diagnostic test results also reveal that our model does not contain any problems of autocorrelation, heteroscedasticity, misspecification, and non-normality.

Anahtar Kelimeler:

Globalization, Long-term Interest Rates, Capital Inflows

Asymmetric Effect of Globalization on the Interest Rates on External Debt: The Case of Turkey

Keywords:

Globalization, Long-term Interest Rates, Capital Inflows,

PDF

___

Bertaut, C., DeMarco, L. P., Kamin, S. and Tryon, R. (2012). ABS inflows to the United States and the global financial crisis. Journal of International Economics, 88(2), 219–34.
Carvalho, D. and Fidora, M. (2015). Capital inflows and euro area long-term interest rates. The European Central Bank (ECB) Working Paper Series No: 1798, Frankfurt, Germany: The European Central Bank (ECB). https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1798.en.pdf?cce679c384cc11837abd7f125ddc5bed
Pesaran, M. H., Shin, Y., and Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326.
Shin, Y., Yu, B., Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in an ARDL framework. In: W.C. Horrace & R.C. Sickles (Eds.), Festschrift in Honor of Peter Schmidt (pp. 281-314). New York, NY: Springer Science & Business Media.
Warnock, F.E. and Warnock, V.C. (2009). International capital flows and U.S. interest rates. Journal of International Money and Finance, 28(6), 903–19.