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DETERMINANTS OF CURRENT ACCOUNT: The Relation between Internal and External Balances in Turkey

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  • Idil UZ

Abstract

This paper considers the major determinants of the current account in Turkey. It examines the long-run and short-run impact of the exchange rate and private and public savings on the current account balance. The bounds testing autoregressive distributed lag (ARDL) approach to cointegration is used and the results indicate that there is strong support for cointegration relationship between current account balance and the selected variables. The exchange rate has the strongest impact on the current account, but the signs vary in the long-run and in the short-run. Finally, the study supports the presence twin deficit phenomenon in Turkey, but the relation is slightly weaker than expected.

Suggested Citation

  • Idil UZ, 2010. "DETERMINANTS OF CURRENT ACCOUNT: The Relation between Internal and External Balances in Turkey," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).
  • Handle: RePEc:eaa:aeinde:v:10:y:2010:i:2_10
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    References listed on IDEAS

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    Cited by:

    1. Nurgun Topalli & İbrahim Dogan, 2016. "The structure and sustainability of current account deficit: Turkish evidence from regime switching," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(4), pages 570-589, June.

    More about this item

    Keywords

    Twin deficit; ARDL Approach; Bounds test;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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