Abstract
Turkey is a developing, small, open economy with a volatile growth pattern. One of the major problems of its economy is the current account deficit (CAD) problem. Analyzing the current account deficit, one faces more than one transmission channel: (i) credit growth would increase GDP growth and the CAD; (ii) increases in growth would cause real exchange rate appreciation, thereby increasing imports and the CAD; and (iii) increases in capital inflows would result in exchange rate appreciation, which would stimulate imports and discourage exports, increasing the CAD. This article analyzes these transmission mechanisms to CAD by using a vector autoregression (VAR) methodology for the period 1987Q1 to 2011Q4.
Notes
3 See Berument and Dincer (Citation2004) on the effects of capital flows on Turkish economy.
7 See Gunluk-Senesen and Senesen (Citation2001) and Senesen and Gunluk-Senesen (Citation2003) for empirical analyses of import dependency in Turkey.
8 The capital account balance data are available after 1992.
9 The results are available upon request.
Ozatay, F. 2006. Cari Islemler Dengesine Iliskin Iki Yapisal Sorun ve Mikro Reform Geregi. Uluslararası Ekonomi ve Dis Ticaret Politikalari 1(1): 38–50. Parikh, A. 2006. Relationship between Trade Liberalization, Growth, and Balance of Payments in Developing Countries: An Econometric Study. The International Trade Journal 20(4): 429–467. Cakman, K., and Cakmak, U. 2007. Para Doviz ve Sermaye Piyasalari Arasindaki İliskiler ve İstikrarsizlik Dongusune Katki Yapan Dinamikler: Turkiye Ornegi. Abant Izzet Baysal University Journal of Social Sciences Institute. No. 14. Erkilic, S. 2006. Turkiye’de Cari Acigin Belirleyicileri. Mimeo. Lebe, F., Kayhan, S., Adiguzel, U., and Yigit, B. 2009. The Empirical Analysis of the Effects of Economic Growth and Exchange Rate on Current Account Deficit: Romania and Turkey Samples. Journal of Applied Quantitative Methods 4(1): 69–81. Peker, O., and Hotunluoglu, H. 2009. Turkiye’de Cari Acigin Nedenlerinin Ekonometrik Analizi. Ataturk University Journal of Economics and Administrative Sciences 23(3): 229–237. Telatar, O. M., and Terzi, H. 2009. Turkiye’de Ekonomik Buyume ve Cari Islemler Dengesi Iliskisi. Ataturk University Journal of Economics and Administrative Sciences 23(2): 119–134. Sekmen, F., and Calisir, M. 2011. Is There a Trade-Off Between Current Account Deficits and Economic Growth? The Case of Turkey. International Research Journal of Finance and Economics 62: 166–172. Berument, H., and Dincer, N. 2004. Do Capital Flows Improve Macroeconomic Performance in Emerging Markets? Emerging Markets Finance and Trade 40(4): 20–32. Brook, A., Sédillot, F., and Ollivaud, P. 2004. Channels for Narrowing the US Current Account Deficit and Implications for Other Economies. OECD Economics Department Working Paper, No. 390. Paris: OECD. Barnett, A., and Straub, R. 2008. What Drives U.S. Current Account Fluctuations? European Central Bank Working Paper Series, No.959. Liang, S., 2012. Determinants of the U.S. Current Account. World Academy of Science, Engineering and Technology 6(2): 598–604. Kandil, M., and Greene, J. 2002. The Impact of Cyclical Factors on the U.S. Balance of Payments. IMF Working Paper 02/05, March. Washington, DC: IMF. Edwards, S. 2005. Is the U.S. Current Account Deficit Sustainable? And If Not, How Costly Is Adjustment Likely to Be? Brookings Papers on Economic Activity 0(1): 211–288. Bems, R., Dedola, L., and Smets, F. 2007. US Imbalances: The Role of Technology and Policy. European Central Bank Working Paper, No.719. Fratzscher M., Juvenal, L., and Sarno, L. 2007. Asset Prices, Exchange Rates and the Current Account. European Central Bank Working Paper, No. 790. Khan, M. S., and Knight, M. D. 1983. Determinants of Current Account Balances of Non-Oil Developing Countries in the 1970s: An Empirical Analysis. IMF Staff Papers 30(4): 819–842. Debelle, G., and Faruqee, H. 1996. What Determines the Current Account? A Cross- Sectional and Panel Approach. IMF Working Paper 96/58, June. Washington, DC: IMF. Elliott, G., and Fatas, A. 1996. International Business Cycles and the Dynamics of the Current Account. European Economic Review 40(2): 361–387. Milesi-Ferretti, G. M., and Razin, A. 1998. Sharp Reductions in Current Account Deficits: An Empirical Analysis. European Economic Review 42(3–5): 897–908. Calderon C., Chong, A., and Loayza, N. 2002. Determinants of Current Account Deficits in Developing Countries. Contributions to Macroeconomics 2(1): 1–31. Giuliodori, M. 2004. Nominal Shocks and the Current Account: A Structural VAR Analysis of 14 OECD Countries. Review of World Economics 140(4): 569–591. Chinn, M. D., and Prasad, E. S. 2003. Medium-term Determinants of Current Accounts in Industrial and Developing Countries: An Empirical Exploration. Journal of International Economics 59(1): 47–76. Herwartz, H., and Siedenburg, F. 2007. Determinants of Current Account Imbalances in 16 OECD Countries: An Out-Of-Sample Perspective. Review of World Economics 143(2): 349–374. Ang, H. Y., and Sek, S. K. 2011. Empirical Investigation on the Determinants of Current Account Balances. International Journal of Advanced Computer Sciences 1(4): 146–151. Kalyoncu, H. 2005. Sustainability of Current Account for Turkey: Intertemporal Solvency Approach. Munich Personal RePEc Archive Paper, No.1220. Cakmak, U., and Varlik, C. 2007. The Sustainability of Current Account Deficits in Turkey: A Comparison with Mexico. Iktisat, Isletme ve Finans 22(259): 114–135. Togan, S., and Ersel, H. 2007. Current Account Sustainability: The Case of Turkey. In E. Basci, S. Togan, and J. von Hagen, eds., Macroeconomic Policies for EU Accession, pp. 268–293. Cheltenham, UK: Edward Elgar Publishing. Togan, S., and Berument, H. 2007. The Turkish Current Account, Real Exchange Rate and Sustainability: A Methodological Framework. Journal of International Trade and Diplomacy 1(1): 155–192. Ongan, S. 2008. The Sustainability of Current Account Deficits and Tourism Receipts in Turkey. The International Trade Journal 22(1): 39–62. Polat, U. 2011. Sustainability of Current Account Deficits. African Journal of Business Management 5(2): 577–581. Eken, A. 1990. Cari İslemler Dengesi Uzerine Model Calismasi. The Central Bank of the Republic of Turkey, Research Department Working Paper, No. 9020, pp.73–90. Ankara: Central Bank of the Republic of Turkey. Kasman, A., Turgutlu, E., and Konyali, G. 2005. The Main Cause of Current Account Deficit: Overvalued TL or Economic Growth? Iktisat, Isletme ve Finans 20(233): 88–98. Ozmen, E. 2005. Macroeconomic and Institutional Determinants of Current Account Deficits. Applied Economic Letters 12(9): 557–560. Erkilic, S. 2006. Turkiye’de Cari Acigin Belirleyicileri. Mimeo. Cakman, K., and Cakmak, U. 2007. Para Doviz ve Sermaye Piyasalari Arasindaki İliskiler ve İstikrarsizlik Dongusune Katki Yapan Dinamikler: Turkiye Ornegi. Abant Izzet Baysal University Journal of Social Sciences Institute. No. 14. Lebe, F., Kayhan, S., Adiguzel, U., and Yigit, B. 2009. The Empirical Analysis of the Effects of Economic Growth and Exchange Rate on Current Account Deficit: Romania and Turkey Samples. Journal of Applied Quantitative Methods 4(1): 69–81. Telatar, O. M., and Terzi, H. 2009. Turkiye’de Ekonomik Buyume ve Cari Islemler Dengesi Iliskisi. Ataturk University Journal of Economics and Administrative Sciences 23(2): 119–134. Erdogan, S., and Bozkurt, H. 2009. Turkiye’de Cari Acigin Belirleyicileri: MGARCH Modelleri ile Bir Inceleme. Maliye Finans Yazilari 23(84): 135–172. Sekmen, F., and Calisir, M. 2011. Is There a Trade-Off Between Current Account Deficits and Economic Growth? The Case of Turkey. International Research Journal of Finance and Economics 62: 166–172. Kayikci, F. 2012. Determinants of the Current Account Balance in Turkey: Vector Auto Regression (VAR) Approach. African Journal of Business Management 6(17): 5725–5736. Gunluk-Senesen, G., and Senesen, U. 2001. Reconsidering Import Dependency in Turkey: The Breakdown of Sectoral Demands with respect to Suppliers. Economic Systems Research 13(4): 417–428. Senesen, U., and Gunluk-Senesen, G. 2003. Import Dependency of Production in Turkey: Structural Change from 1970s to 1990s. Tenth Annual Conference of Economic Research Forum (ERF), December 16–18, Cairo.