The Relationship Between Current Account Deficit and Foreign Investments in Turkey: Rolling Window Causality Analysis

It can be said that the current account, which is one of the main account groups in the balance of payments, is an important indicator of economic stability for countries. Like most developing countries, one of the main macroeconomic problems of Turkey is undoubtedly the chronic current account deficit. In this context, what kind of policies will be implemented in order to eliminate the current account deficits gains importance. This study aims to explainthe relationship between the current account deficit, which has become chronic in Turkey for years, and foreign investments the importance of foreign investments in financing the current account deficit. The study covers Turkey's 2002Q1-2020Q3 period in order to achieve this aim. The variables of the study are foreign direct investments (FDI), portfolio investments (PI) and current account deficit (CAD); In addition to the symmetrical Hacker and Hatemi-J (2006) and asymmetrical Hatemi-J (2012) causality tests, the Rolling Window causality test was used as a method. In the findings, it has been determined that there is a relationship between the current account deficit and foreign investments in some periods, and foreign direct investments have a positive effect on the current account deficit, while portfolio investments have a negative effect.