The predictability of credit rating agencies crisis: The case of Turkey

The reasons such as the Pozitif effect of globalization on the development of Money and capital market of providing the investments to be done in a more secure and faster way by the technological innovations, the increasing number and type of financial products changing the financial market has resulted in an increase in international capital emit and volume. This case not only provides circumstances for investment with fund suppliers in a country that they want and in a field that they wish, but also makes it easy for the fund suppliers to reach to the sources. However, the investors do not have enough information about the country that they will invest in. This case constitutes the basic existence credit rating agencies. These agencies present it to the investors by categorizing the capability of the country or firms to pay debts back precisely and on time by depending upon specific majors and criteria in a letter or an numeric system that everyone can understand. As low credit rating grade can result in the flow of capital from economy of the company and increasing debt cost an economic crisis. In this study, VAR model was set by using the grade and level predictions, portion of dollarization, real exchange rate and customer price index that S&P credit levelization institute between 1992 - 2009 granger causality analysis were done and the direction of variables that were taken into the model was investigated. The long term relationship between the variables was tried to be found by doing Johansen co integration test. It was aimed to see the reactions between impulse ? response functions and unit root standard error shocked in variables. Lastly, by the decomposition of variance, proportional effects of logged value of variables were observed. The result shows that the changes in variables cannot be explained by the country credit level and level predictions; in other words, the grades of credit rating agencies are not; notable notes. Moreover, the result of Zivot ? Andrews single endogeny structural break point and Lee ? Strazicich double endogeny structural break point unit root tests results were compared with credit rating grade. In conclusion, the breaking dates that were found in the end and, deficiency of S&P in any down grade and negative level predictability in advance are supported with alternative causality analysis result.Key Words: Credit Rating Agencies, Unit Root Tests, Cointegration, Causality, VAR Analysis