Intertemporal solvency of Turkey’s current account (original) (raw)
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On the optimality and sustainability of Turkey’s current account
Empirical Economics, 2008
We analyze Turkey's current account optimality and sustainability between 1992 and 2004. Using the intertemporal benchmark model for Turkey's current account we test for its intertemporal solvency. Based on traditional and alternative tests (which account for persistence in the current account), we conclude that Turkey breached the intertemporal solvency condition in the sample period. In addition, stationarity tests of the deviation between actual and optimal net external liabilities series confirm that Turkey's current account deficit was unsustainable for that period. However, further econometric investigation and analysis of reforms causes us to question our conclusions of non-optimality and unsustainability of the Turkish current account for the latter part of the period.
Current account sustainability and capital flows case of Turkey
2012
This thesis applies Granger Causality Tests to balance of payments accounts of Turkey between the first quarter of 1992 and the last quarter of 2009, in order to test effectiveness of current account sustainability indicators that are derived by two major theoretical conceptions about current account sustainability. First theoretical conception is called "current account oriented views." That approach states that high and persistent current account deficits may be outcomes of some structural vulnerabilities of the domestic economy. Those vulnerabilities can arise from trade deficits, budget deficits, and saving-investment gap. Second theoretical conception is called "capital account oriented view." According to that approach, high and persistent current account deficits are the main outcomes of speculative-led economic growth and current account deficits which are induced by high capital inflows. Results show that the current account balance of Turkey is mainly driven by capitalfinancial account and portfolio investments subaccount, during postinternational financial liberalization era. Additionally, causal relationship between current and capital-financial account balances arises from causality from capital-financial account to goods and services subaccount of current account. Finally, according to test results, financial account oriented indicators are found more effective than conventional indicators.
Sustainability of Turkish Current Account Deficit in the Post-Crisis Period
bs.teilar.gr
Persistent rise in current account deficit (CAD) and the way that the country finances its CAD constitutes one of the major sources of external fragility in Turkey. Therefore, sustainability of CAD has become one of the critical issues for at least two decades. In this study, intertemporal budget constraint model was used to examine the sustainability of Turkish CAD after the financial crisis in 2001. Unit root and cointegration techniques were employed in the analysis. The main result of the study indicates that Turkish CAD is sustainable in a weak sense for the postcrisis period.
The objective of this paper is to examine the long-run tendency of Turkish current account imbalances and to understand its behaviour over the 1992-2009 period. The intertemporal solvency model of Hakkio and Rush (1991) and Husted (1992) is employed which is based on the cointegrating relationship between exports and imports. Conventional time series methods do not consider structural breaks and the fractional dynamics of time series. However, Turkish economy experienced some economic crises and policy changes within this period. Therefore the presence of structural changes in the series is taken into account in this study. The fractional integration method is also applied to analyze the sustainability of current account deficit in Turkey. The empirical evidence revealed that the current account deficit has mostly been unsustainable for the sample period and there has been much more need for policy actions to overcome the structural causes of the persistent deficit.
Sustainability of Current Account Deficit in Turkey
International Journal of Business and Economic Sciences Applied Research, 2020
Purpose: This study aims to examine the sustainability of the current account deficit in Turkey for the quarterly data between 2003 and 2018. Besides, some policy implications are made to ensure the sustainability of the current account deficit in Turkey's economy. Design/methodology/approach: The dynamics related to the sustainability of the current account deficit is analysed within the framework of the "intertemporal budget constraint approach" developed by Husted (1992). The long-term dynamics are empirically investigated using the Johansen cointegration test. Econometric analysis is also expanded within the framework of the Vector Error Model to reveal the short-term dynamics. Findings: The results of Johansen cointegration analysis suggest that current account income and expenses are integrated with the cointegrating coefficient less than 1, implying that Turkey has a weak form of current account deficit sustainability. Findings of the Vector Error Correction mod...
Revisiting current account sustainability in Turkey: analysis via Fourier techniques
International Journal of Sustainable Economy, 2019
The primary purpose of this study is to examine the current account sustainability in Turkey using quarterly data covering the period between 1992:1 and 2017:1. To this end, the study applies two recently developed stationarity and cointegration tests based on intertemporal budget constraint. Both avenues analyse the mean-reverting behaviour of the current account balance using Fourier unit root and cointegration analysis which can scrutinise an unknown number of structural breaks, capture sharp breaks, and approximates them as smooth gradual processes. Empirical findings show that Fourier KPSS unit root test rejects the non-stationarity of current account balance to GDP ratio implying that shocks to current account balance are not persistent. Besides, empirical findings also exhibit weak form sustainability in the short-run whereas its form is strong in the long-run.
An Intertemporal Benchmark Model for Turkey’s Current Account
2006
In this paper, we analyze the Turkish current account between 1992 and 2004 within an intertemporal benchmark model. Increasingly larger current account deficits in the Turkish economy have caused a great level of discussion of the current account but it has mainly focused on the real exchange rate and short-term international competitiveness. However, changes in the fundamentals of the Turkish economy warrant a longer term approach in the analysis. This paper computes the optimal consumption smoothing current account using the intertemporal benchmark model (IBM) and tests for intertemporal solvency of the current account. We find consumption tilting dynamics are in effect. As expected of borrowing developing countries, Turkey tilts consumption to the present. We find support for one of the implications of the IBM, that the current account Granger-causes future changes in national cash flow as implied by the intertemporal benchmark model. However, we also find that the actual consumption smoothing current account is considerably more volatile than the optimal consumption smoothing current account suggesting that speculative forces have driven capital movements during the sample period. From the trends in data and the model and testable implications we believe that although Turkey breached the intertemporal solvency condition in the 1990s, this is not true for Turkey in the period following the 2001 crisis. Therefore, we conclude that changed fundamentals in Turkey have made the high current account deficits sustainable.
The objective of the present paper is to explore the sustainability of external position of Turkey over the period 1987Q 1-2008Q 2 by using the intertemporal approach to current account as well as some important macroeconomic indicators. The empirical methodology used to test the intertemporal model of the current account in this paper is the present value test. Turkey experienced large external deficits and over-valuation of the national currency over the period 2004Q 1-2008Q 2. The empirical evidence presented in this paper indicates that current account deficits of Turkey were unsustainable over the period 1987Q 1-2008Q 2. Furthermore, the empirical results of external sustainability reveal that the actual current account deficits were excessive relative to the optimal current account balances over the period 2004Q 1-2008Q 2. Özet Bu makalenin temel amacı cari işlemler hesabına ilişkin dönemlerarası yaklaşımı ve bazı önemli makroiktisadi göstergeleri kullanarak, Türkiye'nin c...
2014
We analyze Turkey's current account optimality and sustainability between 1992 and 2004. Using the intertemporal benchmark model for Turkey's current account we test for its intertemporal solvency. Based on traditional and alternative tests (which account for persistence in the current account), we conclude that Turkey breached the intertemporal solvency condition in the sample period. In addition, stationarity tests of the deviation between actual and optimal net external liabilities series confirm that Turkey's current account deficit was unsustainable for that period. However, further econometric investigation and analysis of reforms causes us to question our conclusions of non-optimality and unsustainability of the Turkish current account for the latter part of the period. Keywords Current account optimality and sustainability • Intertemporal benchmark model • Multicointegration • Turkey JEL Classification C32 • F32 • F37 • F41 We are indebted to two anonymous referees for insightful comments and suggestions. We would also like to thank seminar participants at Middle Eastern Technical University, Ankara, Turkey, for comments on an earlier version of this paper. Responsibility for all errors remains with the authors.
Sustainability of Current Account Deficit in Turkey (1989-2014)
The current account deficit, as a frequently disputable phenomenon of Turkish economy, is considered as one of the main causes of the crises in the economy. The current account deficit is one of the important problems in some developed countries as well as in developing countries. Indeed, the long-term sustainability of such an incident which results from expenditures in excess of the income or investments in excess of the savings in a country is subject to discussion. Despite its experience of a rapid process of change following the decisions of 24 th January 1980, the Turkish banking sector has been severely damaged during the crisis of November 2000 and February 2001 in particular. The global financial crisis of the year 2008, like the rest of the world, has also increased uncertainties in Turkey along with a reduction in demand, a decline in production which, in turn, led to the emergence of negative impacts on the real and financial sectors. The aim of this study is to examine the sustainability of current account dcflcit in Turkey between the years 1989 and 2014. The technical analysis conducted with the econometric model is also supported by a variety of data analysis.