Effect of exchange rate volatility on current account

The current account deficit, in its simplest terms, means the difference between exports and imports. It is expected that the current account deficit of the country's economies will exhibit a positive outlook, in other words, that foreign sales will exceed foreign purchases. The volatility in the exchange rate affecting the current account is a term that corresponds to the wide fluctuation around the equilibrium value that the exchange rate converges to in the long term. While many factors have positive or negative effects on the current account deficit, the study specifically aims to examine the effects of changes in the exchange rate on the current account deficit. In this direction, a conceptual approach was primarily taken and the phenomenon of balance of payments, current account balance, exchange rate and policies, sustainability of the current account deficit were included, the history of the current account balance in Turkey, the reasons for the current current account deficit and suggestions for its solution were included. In the fourth section of the study, since the volatile series exchange rate was expected, the daily data of the exchange rate were averaged over 30 observations for each month and the data were converted to a monthly series. The analysis was carried out with the GARCH Model using the exchange rate and current account deficit data for the period 1996- 2023. As a result of the analysis, it was concluded that there is a two-way relationship between the current account deficit and the exchange rate and that the change in one of these variables triggers the change in the other variable Keywords: Balance, Current Account, Deficit, Foreign Exchange, GARCH