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The Determinants of Current Account Deficit in Turkey: An Analysis with MGARCH Models

Author

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  • Seyfettin Erdoğan

    (Kocaeli University)

  • Hilal Bozkurt

    (Kocaeli University)

Abstract

In recent years, the problem of current account deficit has been the most important issue emphasized both in the public opin- ion and in the macroeconomics literature. Because an increase in the current deficit/GDP ratio is perceived as a signal of financial crisis and expectations are affected negatively. As a result attenua- tion tendencies occur in macro economic performance. This situa- tion will increase the importance of the studies to be carried out about the reasons (determinants) of the current account deficit. The findings from these studies will be the data source for the macro economic policy. The main aim of this study is to investigate the determinants of current account deficit in Turkey. Monthly data of 1990-2008 peri- ods has been used and MGARCH methodology has been applied. In our Model, oil prices, M2, export / import coverage ratio, infla- tion, inflation uncertainty, exchange rate, exchange rate uncertainty, FDI/GDP are accepted as the determinants of current account defi- cit. According to the conditional correlation obtained from the model export / import coverage ratio has the highest correlation value and oil price has the second highest correlation value.

Suggested Citation

  • Seyfettin Erdoğan & Hilal Bozkurt, 2009. "The Determinants of Current Account Deficit in Turkey: An Analysis with MGARCH Models," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 24(84), pages 135-172, July.
    • Handle: RePEc:acc:malfin:v:24:y:2009:i:84:p:135-172
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    More about this item

    Keywords

    Current Account Deficit; Twin Deficit; MGARCH Models;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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