Abstract
The main purpose of this article is to lay the ground for the answer to the question whether there is an imminent danger of devaluation in Turkey. Therefore , we start the analysis with the concepts of Balance of Payments (BOP) and current Account Deficit (CAD) , and then explain the relationship between the CAD and the value of the national currency. it the national currency is overvalued , then the risk of a devaluation is not a distant possibility. In Turkey , deficits in the trade balance and increase in foreign exchange reserves through ' hot money ' inflows go together. Under these circumstances , the level of foreign exchange reserves alone may not provide the necessary confidence in the value of the national currency. An overvalued national currency will also have undesired effects on the distribution of income. It may also close the economy to healthy foreign trade by discouraging exports and encouraging imports.
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