CURRENT ACCOUNT IMBALANCE AND FOREIGN CAPITAL INFLOWS IN TURKEY WHAT CAUSES WHAT.pdf (original) (raw)
The Turkish economy has a chronic current account deficit problem for many years due to insufficient savings and dependency on energy and intermediate goods import. In order to close the deficit, developing countries need foreign capital. This is also the case for the Turkish economy. In the pre-financial liberalization period, the direction of the causality would be expected from the current account to the capital inflows. After the liberalization, on the other hand, the direction of the causality has become an intensively debated issue. This paper’s aim is to reveal the course of the possible causal nexus between the financial account and the current account (CA) balance using the Toda-Yamamoto causality and the Hatemi-J asymmetric causality tests. The data cover the period of 2002:01-2017:12. Evidence from the test of the asymmetric causality shows that the negative shocks of the portfolio investment Granger causes both the negative and the positive shocks of the current account balance in Turkey.
Loading Preview
Sorry, preview is currently unavailable. You can download the paper by clicking the button above.