Nonlinearity of Turkish Credit Default Swap Spreads

In this paper we analyze the stationarity of Turkish credit default swap (CDS) spreads between 10:2000-08:2017 which is an important indicator for researchers and practitioners. For our data, although the most widely used linear unit root test namely augmented Dickey Fuller (ADF) test fails to reject the presence unit root, non-linear tests of Kapatenios, Snell and Shin (KSS) and Sollis claim stationarity with a smooth transition. Moreover, we detect asymmetry for the encountered smooth transition. Thus we encourage researchers to apply KSS and Sollis test along with ADF test in order to understand the driving processes better which will strengthen the predictability and modeling issues of CDS spreads