MACRO-ECONOMIC VARIABLES AFFECTING THE DEFAULT OF CREDIT CARDS: AN ECONOMETRIC ANALYSIS ON TURKEY

Abstract

In this study, macroeconomic variables that may have an effect on the default of credit cards in Turkey and their effect levels were investigated. Two separate data sets, consisting of quarterly and monthly data covering the period 2013-2022, were analyzed. Seah et al. (2014) a regression model they developed was adapted for Turkey. In this model, an autoregressive error mechanism is used as well as macroeconomic variables, and the past dependence of prediction errors is taken into account. Since the analyzed models are non-linear, parameter estimations are performed with the ML estimator. It has been observed that increases in income level and interest rates decrease the default rate of credit cards. On the other hand, an inverse relationship was found between the inflation rate and the default rate of credit cards. Whether inflation rates increase or not, credit card default rates will not increase unless the economy enters a recession. It is predicted that the default rates may increase if the economy shrinks and unemployment rates increase. It has also been determined that the estimation errors show a strong and positive dependence to the past.