• Derviş Kirikkaleli European University of Lefke
  • Mustafa Tevfik Kartal Borsa İstanbul Strategic Planning, Financial Reporting, and Investor Relations Directorate
  • Tomiwa Sunday Adebayo Cyprus International University
Keywords: Country risk, FX rates, Wavelet coherence, Turkey


This study examines the time and frequency dependency nexus between foreign exchange (FX) rates and country risk in Turkey. We considered Turkey because it is a negative outlier country in terms of the progress of these indicators. Using quarterly data from 1990/Q1 to 2018/Q4 and the Wavelet Coherence approach, we find that an increase in the country risk causes an increase in the FX rates at different frequencies, especially in the medium and long term and different periods. The results highlight the significance of country risk for the progress of the FX rates. Policy implications are discussed.


Download data is not yet available.


Adebayo, T. S., & Akinsola, G. D. (2021). Investigating the Causal Linkage Among Economic Growth, Energy Consumption and CO2 Emissions in Thailand: An Application of the Wavelet Coherence Approach. International Journal of Renewable Energy Development, 10, 17-26.

Adebayo, T. S., & Kirikkaleli, D. (2021). Impact of Renewable Energy Consumption, Globalization, and Technological Innovation on Environmental Degradation in Japan: Application of Wavelet Tools. Environment, Development and Sustainability, 1-26.

Athari, S. A., Kondoz, M., & Kirikkaleli, D. (2021). Dependency between Sovereign Credit Ratings and Economic Risk: Insight from Balkan Countries. Journal of Economics and Business. https://doi.org/10.1016/j.jeconbus.2021.105984

Atmaca, S., & Karadaş, H. A. (2020). Decision Making on Financial Investment in Turkey by Using ARDL Long-term Coefficients and AHP. Financial Innovation, 6, 1-22.

Augustin, P., Chernov, M., & Song, D. (2020). Sovereign Credit Risk and Exchange Rates: Evidence from CDS Quanto Spreads. Journal of Financial Economics, 137, 129-151.

Bahmani-Oskooee, M., Amor, T. H., Nouira, R., & Rault, C. (2019). Political Risk and Real Exchange Rate: What Can We Learn from Recent Developments in Panel Data Econometrics for Emerging and Developing Countries? Journal of Quantitative Economics, 17, 741-762.

Beckmann, J., & Czudaj, R. (2017). Exchange Rate Expectations and Economic Policy Uncertainty. European Journal of Political Economy, 47, 148-162.

Bordo, M. D., Meissner, C. M., & Weidenmier, M. D. (2009). Identifying the Effects of an Exchange Rate Depreciation on Country Risk: Evidence from a Natural Experiment. Journal of International Money and Finance, 28, 1022-1044.

Bouraoui, T., & Hammami, H. (2017). Does Political Instability Affect Exchange Rates in Arab Spring Countries? Applied Economics, 49, 5627-5637.

CBRT. (2021). Electronic Data Distribution System (EVDS). https://evds2.tcmb.gov.tr/index.php?/evds/serieMarket, Accessed March 31, 2021.

Demir, F. (2009). Macroeconomic Uncertainty and Private Investment in Argentina, Mexico and Turkey. Applied Economics Letters, 16, 567-571.

Demir, C. (2019). Macroeconomic Determinants of Stock Market Fluctuations: The Case of BIST-100. Economies, 7, 8.

Depren, Ö., Kartal, M. T., & Kılıç Depren, S. (2021). The Impacts of Monetary Policy Responses to COVID-19 Pandemic on National Currencies: An Emerging Country Case. International Journal of Economic Policy in Emerging Economies, Forthcoming.

Devpura, N., Gunadi, I., & Sasongko, A. (2021). Volatility Spillover of Intraday Exchange Rates on Some Selected Asean Countries. Buletin Ekonomi Moneter dan Perbankan, 24, 335-364.

Dinçer, H., Hacıoğlu, U., & Yüksel, S. (2018). Evaluating the Effects of Economic Imbalances on Gold Price in Turkey with MARS Method and Discussions on Microfinance. In Microfinance and Its Impact on Entrepreneurial Development, Sustainability, and Inclusive Growth. IGI Global.

Ertuğrul, H. M., Özün, A., & Kirikkaleli, D. (2019). How is Financial Stability Impacted by Political and Economic Stabilities in Emerging Markets? A Dynamic Panel Analysis. Journal for Economic Forecasting, 4, 148-159.

Fontana, A., & Scheicher, M. (2016). An Analysis of Euro Area Sovereign CDS and Their Relation with Government Bonds. Journal of Banking & Finance, 62, 126-140.

Gökmenoğlu, K., Kirikkaleli, D., & Eren, B. M. (2019). Time and Frequency Domain Causality Testing: The Causal Linkage between FDI and Economic Risk for the Case of Turkey. The Journal of International Trade & Economic Development, 28, 649-667.

Goupillaud, P., Grossmann, A., & Morlet, J. (1984). Cycle-octave and Related Transforms in Seismic Signal Analysis. Geoexploration, 23, 85-102.

Hajilee, M., & Al Nasser, O. M. (2014). Exchange Rate Volatility and Stock Market Development in Emerging Economies. Journal of Post Keynesian Economics, 37, 163-180.

Hassan, M. K., Kayhan, S., & Bayat, T. (2017). Does Credit Default Swap Spread Affect the Value of the Turkish Lira Against the US Dollar? Borsa Istanbul Review, 17, 1-9.

Iyke, B. N., Phan, D. H. B., & Narayan, P. K. (2022). Exchange Rate Return Predictability in Times of Geopolitical Risk. International Review of Financial Analysis, 81, 102099. https://doi.org/10.1016/j.irfa.2022.102099

Jebran, K., & Iqbal, A. (2016). Dynamics of Volatility Spillover between Stock Market and Foreign Exchange Market: Evidence from Asian Countries. Financial Innovation, 2, 1-20.

Kartal, M. T. (2020). The Behavior of Sovereign Credit Default Swaps (CDS) Spread: Evidence from Turkey with the Effect of COVID-19 Pandemic. Quantitative Finance and Economics, 4, 489-502.

Kartal, M. T. (2021). The Effect of COVID-19 Pandemic on Oil Prices: Daily Evidence from Turkey. Energy Research Letters, 1, 1-4.

Kartal, M. T., Depren, Ö., & Kılıç Depren, S. (2020). The Determinants of Main Stock Exchange Index Changes in Emerging Countries: Evidence from Turkey in COVID-19 Pandemic Age. Quantitative Finance and Economics, 4, 526-541.

Kartal, M. T., Kılıç Depren, S., & Depren, Ö. (2021a). How Main Stock Exchange Indices React to COVID-19 Pandemic: Daily Evidence from East Asian Countries. Global Economic Review, 50, 54-71.

Kartal, M. T., Kirikkaleli, D., & Ayhan, F. (2021b). Nexus between Non-performing Loans and Economic Growth in Emerging Markets: Evidence from Turkey with Wavelet Coherence Approach. International Journal of Finance and Economics. https://onlinelibrary.wiley.com/doi/10.1002/ijfe.2474

Khan, M. K., Teng, J. Z., & Khan, M. I. (2019). Cointegration between Macroeconomic Factors and the Exchange Rate USD/CNY. Financial Innovation, 5, 1-15.

Kirikkaleli, D. (2016). Interlinkage between Economic, Financial, and Political Risks in the Balkan Countries: Evidence from a Panel Cointegration. Eastern European Economics, 54, 208-227.

Kirikkaleli, D. (2019). Time-frequency Dependency of Financial Risk and Economic Risk: Evidence from Greece. Journal of Economic Structures, 8, 1-10.

Kirikkaleli, D. (2020a). The Effect of Domestic and Foreign Risks on an Emerging Stock Market: A Time Series Analysis. The North American Journal of Economics and Finance, 51. https://doi.org/10.1016/j.najef.2018.11.005

Kirikkaleli, D. (2020b). Does Political Risk Matter for Economic and Financial Risks in Venezuela? Journal of Economic Structures, 9, 3.

Kirikkaleli, D. (2021). Analyses of Wavelet Coherence: Financial Risk and Economic Risk in China. Journal of Financial Economic Policy. https://doi.org/10.1108/JFEP-08-2019-0174

Kirikkaleli, D., & Gökmenoğlu, K. K. (2020). Sovereign Credit Risk and Economic Risk in Turkey: Empirical Evidence from a Wavelet Coherence Approach. Borsa Istanbul Review, 20, 144-152.

Kirikkaleli, D., & Özün, A. (2019). Co‐movement of Political Risk and Sovereign Credit Risk: A Wavelet Coherence Analysis for Argentina, Brazil, and Venezuela. Social Science Quarterly, 100, 2094-2114.

Kondoz, M., Kirikkaleli, D., & Athari, S. A. (2021). Time-frequency Dependencies of Financial and Economic Risks in South American Countries. The Quarterly Review of Economics and Finance, 79, 170-181.

Korhonen, M. (2015). The Relation between National Stock Prices and Effective Exchange Rates: Does It Affect Exchange Rate Exposure. Global Economy Journal, 15, 241-256.

Krol, R. (2014). Economic Policy Uncertainty and Exchange Rate Volatility. International Finance, 17, 241-256.

Liu, J., Wei, W., Shi, Y. B., & Chang, C. P. (2020). The Nexus between Country Risk and Exchange Rate Regimes: A Global Investigation. The North American Journal of Economics and Finance, 51, 100842.

Maitra, B. (2017). Monetary and Fiscal Factors in Nominal Interest Rate Variations in Sri Lanka under a Deregulated Regime. Financial Innovation, 3, 1-17.

Münyas, T. (2020). Evaluation of the Relationship between Credit Default Swaps and EURO and USD Exchange Rates: The Case of Turkey. Business & Management Studies: An International Journal, 8, 1113-1130.

Narayan, P. K., Phan, D. H. B., & Liu, G. (2020). COVID-19 Lockdowns, Stimulus Packages, Travel Bans, and Stock Returns. Finance Research Letters, 101732.

Obeng, S. K. & Sakyi, D. (2017). Macroeconomic Determinants of Interest Rate Spreads in Ghana. African Journal of Economic and Management Studies, 8, 76-88.

Onanuga, A. T., & Shittu, A. M. (2010). Determinants of Interest Rates in Nigeria: An Error Correction Model. Journal of Economics and International Finance, 2, 261-271.

Orhan, A., Adebayo, T. S., Genç, S. Y., & Kirikkaleli, D. (2021). Investigating the Linkage between Economic Growth and Environmental Sustainability in India: Do Agriculture and Trade Openness Matter? Sustainability, 13, 4753.

Orhan, A., Kirikkaleli, D., & Ayhan, F. (2019). Analysis of Wavelet Coherence: Service Sector Index and Economic Growth in an Emerging Market. Sustainability, 11, 6684.

PRS Group. (2021a). International Country Risk Guide. https://www.prsgroup.com/explore-our-products/international-country-risk-guide, Accessed March 31, 2021.

PRS Group. (2021b). Data of Country Risk. Obtained from the PRS Group via e-mail on March 31, 2021.

Rodriguez, C. M. (2016). Economic and Political Determinants of Exchange Rate Regimes: The Case of Latin America. International Economics, 147, 1-26.

Saeed, A., Awan, R. U., Sial, M. H., & Sher, F. (2012). An Econometric Analysis of Determinants of Exchange Rate in Pakistan. International Journal of Business and Social Science, 3, 184-196.

Sharif, A., Aloui, C., & Yarovaya, L. (2020). COVID-19 Pandemic, Oil Prices, Stock Market and Policy Uncertainty Nexus in the US Economy: Fresh Evidence from the Wavelet-based Approach. International Review of Financial Analysis, 101496.

Shuaibu, S. M., & Kirikkaleli, D. (2020). Investigating the Nexus Between Political Risk and Economic Risk: A Wavelet Coherence Analysis for Greece, Albania, Bulgaria and Romania. Economic Computation & Economic Cybernetics Studies & Research, 54, 283-299.

Sujit, K. S., & Kumar, B. R. (2011). Study on Dynamic Relationship among Gold Price, Oil Price, Exchange Rate and Stock Market Returns. International Journal of Applied Business and Economic Research, 9, 145-165.

Topak, M. S., & Muzir, E. (2011). Examination of Country Risk Determinants Using Artificial Neural Networks: The Case of Turkey. International Research Journal of Finance and Economics, 75.

Torrence, C., & Compo, G. P. (1998). A Practical Guide to Wavelet Analysis. Bulletin of the American Meteorological Society, 79, 61-78.

Wang, Y. S., & Chueh, Y. L. (2013). Dynamic Transmission Effects between the Interest Rate, the US Dollar, and Gold and Crude Oil Prices. Economic Modelling, 30, 792-798.

Yıldırım, Z. (2020). External and Domestic Shocks, Exchange Rate, Country Risk Premia and Macroeconomic Conditions in Turkey. İstanbul İktisat Dergisi, 70, 73-112.

PlumX Metrics

How to Cite
Kirikkaleli, D., Kartal, M., & Adebayo, T. (2022). TIME AND FREQUENCY DEPENDENCY OF FOREIGN EXCHANGE RATES AND COUNTRY RISK: EVIDENCE FROM TURKEY. Buletin Ekonomi Moneter Dan Perbankan, 25(1), 37-54. https://doi.org/10.21098/bemp.v25i1.1838