Dogus Emin

By Dogus Emin

This chapter studies the impacts of short-term interest rates of United States and emerging markets risk premia as external factors on Turkish short-term interest rates and daily exchange rates during the period of January 2011–December 2018. Following Edwards and Borensztein et al., we construct a vector autoregressive (VAR) model with the domestic short-term interest rates, exchange rate against the US Dollar, the US interest rates and iShares MSCI emerging markets ETF. Hereby, we intend to shed some light on the reaction of Turkish interest rates and exchange rates to the short-term US interest rates and emerging markets instability. As other emerging countries, Turkey is rather economically and politically unstable country. Even a little political development may cause a serious volatility in the market. For that reason, in this study we specifically examine the periods that are known as politically stressed times and tranquil periods separately to see how external factors’ behaviors change during shock periods.

Part of the book: Financial Crises

By Doğuş Emin and Samet Kocamış

This study explores the eligibility criteria for swap line agreements with the Federal Reserve (Fed) by constructing a composite index that incorporates macroeconomic and U.S.-related indicators. The aim is to provide insight into the factors affecting the Fed’s decision-making process and shed light on the variables that impact a country’s eligibility for swap lines focusing on the Global Financial Crisis period and Covid-19 pandemic period. Using logistic regression model and principal component analysis, the study constructs two sub-indices: the Macroeconomic Index and the U.S. Related Index. These indices capture relevant indicators likely used in the assessment process of countries. The model’s effectiveness is tested by analyzing countries that were rejected for swap line agreements. Findings reveal that several macro-level variables and U.S.-related variables significantly explain a country’s probability of establishing a secure swap line with the Fed. Key indicators include trade volume, real GDP, international reserves, external debt, and U.S. financial claims on foreign countries. The constructed composite index successfully predicts eligibility outcomes for the countries studied, demonstrating a high level of accuracy. Policy implications derived from the study highlight the importance of transparency, robust index construction, macroeconomic stability, bilateral relationships, and predictive modeling.

Part of the book: Economic Recessions - Navigating Economies in a Volatile World and the Path for Economic Resilience and Development [Working title]