Abstract
Sustainability of the current account deficits in Turkey was evaluated according to the macroeconomic fundamentals together with discussing the composition of current account deficit and the way of financing to have insights about the future path of current account balance. Problem about current account deficits were considered as structural since they were caused by foreign trade deficits largely as an outcome of dependence of production and exports on imported intermediate goods. Furthermore, there were negative developments about the way of financing in last years that share of debt instruments in financing has increased against Foreign Direct Investment. As a result, it has seen that Turkey would continue to have current account deficits in the next years and sustainability of these deficits has become increasingly difficult.
Highlights
The pattern of current account imbalances has received considerable attention in the economics literature for many years
Sustainability of the current account deficits in Turkey was evaluated according to the macroeconomic fundamentals together with discussing the composition of current account deficit and the way of financing to have insights about the future path of current account balance
Problem about current account deficits were considered as structural since they were caused by foreign trade deficits largely as an outcome of dependence of production and exports on imported intermediate goods
Summary
The pattern of current account imbalances has received considerable attention in the economics literature for many years. In 1994, Mexican peso crisis and subsequent currency crises in the Latin America arouse, followed by a wave of currency crises of Asia in 1997 and 1998 It was in Turkey at the beginning and in Argentina at the end of 2001 that we witnessed the collapse of local currencies followed by free floating of the currencies. These series of crises in the last decade were so frequent that the existing models were inadequate in explaining them; a significant collection of studies accumulated, giving way to different interpretations of the currency and balance of payments crises. Policymakers and economists have paid more attention and to work more frequently on the issue This has increased the volume of studies about the measures of sustainable current account deficits in the economic literature. Some sustainability criteria were developed and these were used as indicators for the crises
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