Budget deficit, relationship between the current account and the case of Turkey (1994?2010)

This study is investigated the presence of the twin deficits hypothesis in a different period of Turkey. As well known, the twin deficits hypothesis suggests that there is a positive relation between the budget and current account deficit. Accordingly, beside of budget deficits are also the reason of current account deficits, budget deficits and current account deficits are appear and a follow parralel path at the same time. But this hypothesis, the existence of such a relationship strongly opposed and rejected by The Ricardian?s and try to prove it with evidence supports their hypothesis. While these discussions are continued between the two different approaches, the Twin Deficits Hypothesis, one of the most important subjects, has been studied both theoretically and empirically as macroeconomic issues in open economies.The purpose of study is to investigate the existence of twin deficits hypothesis for Turkey and examine to structures and directions of the relationship if there is. In this thesis, monthly data were used for research of the period 1994?2010. Granger causality test was applied to test of existance and direction of the relationship between budget deficits and current account deficits.According to Causality test results, there is an interaction between the both deficits however it also revealed that the traditional approach is complied with the period of 1994?2010 of Turkey. This result is supported that the hypothesis of Traditional Keynesian?s view of twin deficits. Furthermore, this result is concluded that the direction of the relationship between budget and current account deficit is from current account deficit to the budget deficit. In other word, the current account deficit causes of budget deficit but the budget deficit does not cause the current account deficit.