The relationship between inflation, economic growth and current account deficit: An econometric analysis in the case of Turkey

Classical economics argues that the basis of economic growth is capital accumulation, division of labor and specialization. The Keynesian view suggested government intervention, claiming that aggregate demand management is at the root of economic growth. The economic thoughts that emerged later argued that the economy management should play a passive role for economic growth and emphasized that fiscal policies should not be resorted to. In addition, ensuring the continuity of economic growth, which is the main concern of all economy managers, is among the main objectives. The economics literature seeks answers to the questions of what the main determinant of economic growth is and how it can be sustained. In this study, the relationship between inflation, economic growth and current account deficit in Turkey has been examined by econometric methods. The findings of the study show that there is a negative relationship between inflation and current account deficit. However, when all the results are evaluated together, it is understood that the main determinants of the current account deficit in Turkey are the external debts together with the budget balance. It can be said that the central budget deficit has a direct and indirect effect on the current account deficit, assuming that the budget deficit in Turkey is covered by external debt and the interest payments arising from external debt payments increase the current account deficit.