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

Authors : Rasim YILMAZ, Jülide YALÇINKAYA KOYUNCU

Pages : 189-193

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Publication Date : 2019-03-01

Article Type : Research Paper

Abstract :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 insert ignore into journalissuearticles values(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.
Keywords : Globalization, Long term Interest Rates, Capital Inflows