Perspectives regarding Current Account Deficit, Interest Rates, Inflation and Exchange Rates; Turkey Example1

Abstract

The current account deficit problem has become one of the chronic problems of Turkey during recent years. To achieve macroeconomic balance, the share of the current account deficit in the gross domestic product should be kept under control. Due to this reason, it is of great significance for the economic policies to be formed to analyze the factors affecting the current account deficit and to reveal which one has a larger share of the current account deficit. Turkey's current account deficit between the years 2002-2019 will be analyzed with the VAR model and the Granger causality test in this study. The purpose of the study is to reveal the whole of the factors affecting the current account deficit and to reveal the relationship between inflation, which is seen as financing the current account deficit, but which is one of the biggest problems of the Turkish economy, the exchange rate, which is the most significant factor in our foreign trade, and the interest rate trio, which affects the foreign capital inflow to the country, with the current account deficit.