The Validity of Triplet Deficit in Turkey

With globalization, international capital moves by taking into account the sensitivity of economies against external and internal shocks, in other words, their fragility among open economies. Located between the fragile economies of Turkey's economy, it is important to evaluate the scope of external financial vulnerability and fragility. External fragility is associated with the current account deficit, while fiscal fragility is associated with the budget deficit and savings deficit. The relationship between these parameters is the subject of the triple deficit hypothesis. According to this hypothesis, savings and budget deficits are expected to have a positive effect on the current account deficit. In this context, this study aims to test the validity of triplet deficit hypothesis in Turkish economy. Markov regime change model were performed to determine the triplet deficit hypothesis. According to the markov regime change model, it was determined that the savings deficit positively affected the current account deficit during the periods of contraction and expansion, and the budget deficit only negatively affected the current account deficit during the expansion period. As as result, the study finds that triplet defict hypothesis was invalid in Turkey over the period of 2006:1-2020:3 quarter period.