The Impact of Capital Flows on Current Account Deficit for Turkey (original) (raw)
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The effects of capital inflows on Turkish macroeconomic performance
Empirica, 2015
Capital inflows are important factor affecting macroeconomic performance, such as the real exchange rate, interest rates, output, and price level. However, the components of capital inflows are also important. Capital inflows in the forms of portfolio investment liabilities, foreign direct investment, and other investment liabilities may affect these macroeconomic variables differently. The main focus of this study is to analyze the behavior of key macroeconomic variables in response to the different components of capital inflow shocks for Turkey using monthly data from 2000:1 to 2012:12 by utilizing a vector autoregression model.
The high rate of deficit in current accounts in Turkey shows a marked increase compared to the period before 2003. On the other hand, outsourcing in forms of foreign investments and external borrowing in order to finance the current deficits has shown a similar increase. This parallelism makes apparent the effects of capital movement, specifically of foreign direct investments on current accounts. With the aim of proving foreign direct investments different from portfolio investments and external debts in the financing of current account deficits, this study analyzes short-term and long-terms relationships. It identifies foreign direct investments as the primary active variable in the financing of current deficit.
How Have FDI Flows Effected to Current Account Balance: In Turkey Case
China-USA Business Review, 2012
The purpose of this paper is to study the foreign direct investment flows of Turkey contributed to fragility to financial crisis by causing chronic current account deficits and was concerned with a slowdown in export growth prior to the financial crisis. This recommends that when analyzing a country's fragility to financial crisis, underscore should not only be placed on the reversibility of flows furthermore on the macroeconomic effect of these flows. The data set used for the empirical analysis in this paper consists of annual observations extending from 1982 to 2008 on Foreign Direct Investment (FDI) and Current Account (CA) in the Turkish economy. All variables are expressed in US Dollar ($). Data were obtained from IMF Database (2010). The empirical evidence shows that foreign direct investment influent directly to current account balance. However, current account balance does not impressive to foreign direct investment. These reasons are merging with economics weakness and slowdown in export growth rate. Current account deficit is growth faster than past. Finally, the post-financial crisis impacts are deeply than the preliminary-financial crisis impacts for Turkey.
The Analysis of the Short-term Capital Movements by Using the VAR Model: The Case of Turkey
The Pakistan Development Review
This paper investigates the relations among short-term capital inflows, government deficit, interest rate differentials, real exchange rate and some accounts of the balance of payments in Turkey in 1990s by using the vector autoregression (VAR) technique. The dynamic behaviours of each variable due to random shocks given to short-term foreign liabilities are captured by impulse response functions, and the portion of variance in the prediction for each variable in the system that is attributable to its own innovations and to shocks to other variables in the system is analysed by variance decomposition method. It is found that the policy of high interest-low exchange rate (hot money) is the main reason for the short-term capital inflows in Turkey, and we propose some main controls on capital inflows to limit some of the macroeconomic repercussions of these inflows.
A4. How Have FDI Flows Effected to Current Account Balance In Turkey Case.pdf
The purpose of this paper is to study the foreign direct investment flows of Turkey contributed to fragility to financial crisis by causing chronic current account deficits and was concerned with a slowdown in export growth prior to the financial crisis. This recommends that when analyzing a country's fragility to financial crisis, underscore should not only be placed on the reversibility of flows furthermore on the macroeconomic effect of these flows. The data set used for the empirical analysis in this paper consists of annual observations extending from 1982 to 2008 on Foreign Direct Investment (FDI) and Current Account (CA) in the Turkish economy. All variables are expressed in US Dollar ($). Data were obtained from IMF Database (2010). The empirical evidence shows that foreign direct investment influent directly to current account balance. However, current account balance does not impressive to foreign direct investment. These reasons are merging with economics weakness and slowdown in export growth rate. Current account deficit is growth faster than past. Finally, the post-financial crisis impacts are deeply than the preliminary-financial crisis impacts for Turkey.
Economic Computation and Economic Cybernetics Studies and Research Academy of Economic Studies, 2013
In this study, it was analysed if there is a short and long term relationship among the current deficit, short-term capital movements and the economic growth within the periods of 1998Q1-2011Q4 in Turkey. It was used to Autoregressive Distributed Lag model for analyzing the series. As a result of the Autoregressive Distributed Lag model test, it was confirmed the co-integration relationship among the series related to current deficit, economic growth and short term capital flows in short term and long term.
FOREIGN CAPITAL FLOWS, FDI AND ECONOMIC GROWTH IN TURKEY IN THE POST CRISIS PERIOD
The impact of foreign direct investments (FDI), portfolio investments (PI) on economic growth has been a debate in the literature. On the other hand economic growth may be a factor that attracts the FDIs and PIs. Thus, the aim of this paper is to analyze the direction of the relationship by using Granger causality between economic growth, foreign direct investments and portfolio investments in Turkey following the 2001 crisis. The results show that PIs Granger causes economic growth whereas FDIs do not show a significance. Economic growth granger causes both FDIs and PIs meaning that economic growth leads the flow of direct and indirect investments. In addition, impulse response functions support the importance of economic growth on the three variables. The paper further calculates variance decompositions based on estimated VAR system and it is still evident that the economic growth is dominantly significant in explaining the forecast error variance in both FDIs, PIs and economic growth.
CURRENT ACCOUNT IMBALANCE AND FOREIGN CAPITAL INFLOWS IN TURKEY WHAT CAUSES WHAT.pdf
2018
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.
Capital flows and current account dynamics in Turkey: A nonlinear time series analysis
Economic Modelling, 2014
The paper offers an analysis of current account dynamics and its sustainability in Turkey using quarterly data. The focus is on the nonlinear characterization of the longrun intertemporal budget constraint and the stationarity tests. Several well-known tests are applied to identify nonlinearity in the current account time series. The analysis reveals that while the classical unit root tests based on linear specification give rise to conflicting results as to the nonstationarity of the current account deficit series, a threshold unit root test due to Caner and Hansen (2001) fails to reject the null of nonstationarity, implying that the intertemporal budget constraint would not be satisfied in the long run.
19 Mayıs Sosyal Bilimler Dergisi, 2021
This study investigates the effects of gold imports, energy imports and short-term capital inflows on current account deficits using Turkish quarterly data for the period 1996Q1-2021Q1. To this end, first, the current account deficit model is built based on the literature review and estimated using the autoregressive distributed lag (ARDL) model. Then the presence of cointegration among relevant variables is tested by employing bounds testing, and then the error correction model is estimated. The bounds testing results indicate cointegration among current account deficits, gold imports, energy imports, portfolio investment, foreign direct investment, reel effective exchange rate, real gross domestic products, openness, and financial development. The empirical findings of this study reveal that while gold imports play a significant deteriorating role on Turkish current account deficits in the short and in the long term, energy imports and portfolio investment only have a short-term effect. Furthermore, appreciation of Turkish currency seems to increase current account deficits only in the long term; it has no short-term effect. Interestingly, the openness proxy, which is being used as a ÇELİK & YAVUZ Factors Responsible For Current Account Deficits in Turkey: Short-Term Capital Inflows, Energy Imports or Gold Imports? 19 Mayıs Journal of Social Sciences 758 measure of international trade integration of a country to the world economy, exerts no effect on current account deficits neither in the long-term and nor in the short-term.