The relationship between the current account balance and financial variables: Case of Turkey

In this study, in Turkey, the current account balance has been studied to isolate the variables that affect financial and were studied to reveal the most important variable. In this study, Granger causality test reviewed and reviewed variance decomposition analysis by creating a model with impulse response functions. The study covers the period 1980-2014. Variables such as economic growth, real interest rate, real effective exchange rate, the ratio of external debt, the Money supply and the rate of inflation were determined. Consequently, in the light of theoretical and empirical studies, the results of Granger causality test is understood to be between current account deficit and foreing debt ratio is muntual and unidirectional causality between the exchange rate and the current account deficit. The results of the Var model has revealed long-term relationship between current account deficit and all the other factors. Results of the Variance decomposition has shown that the current account deficit is affected the high rate of current account deficit by the previous and external debt ratio. Key Words : Current Account Balance, Financial Variables, VAR andGranger Causality Test, Turkey's Current Account Balance History