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Analyzing the Present Sustainability of Turkey’s Current Account Position

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Author Info

  • Ayla Ogus

    ()
    (Department of Economics, Izmir University of Economics)

  • Niloufer Sohrabji

    ()
    (Department of Economics, Simmons College)

Abstract

In this paper we assess the present sustainability of Turkey’s current account position using the framework provided by Milesi-Ferretti and Razin (1996) based on the ability-to-pay and willingness-to-lend model. This framework allows us to assess the structural features and macroeconomic policy indicators. We extend this framework by considering global sustainability indicators as well. Using data for three periods, 1991-1993, 1998-2000 and 2004-2006 we evaluate the present sustainability in light of the prior two crises (1994, 2001). Based on our analysis of these factors in the extended framework, we conclude that Turkey’s internal structure and macroeconomic conditions (such as exports and the fiscal position) have improved that are allowing Turkey to continue having large and increasing current account deficits. However, there is vulnerability from global factors namely the impending U.S. recession and a potential global slowdown. This might require some adjustments in policy to continue accumulating large deficits.

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Bibliographic Info

Paper provided by Izmir University of Economics in its series Working Papers with number 0803.

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Length: 42 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:izm:wpaper:0803

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Web page: http://eco.ieu.edu.tr
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Related research

Keywords: Current account sustainability; predictors of crisis; Turkey;

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Cited by:
  1. Ayla Ogus & Niloufer Sohrabji, 2008. "Intertemporal solvency of Turkey’s current account," Working Papers 0805, Izmir University of Economics.

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