New open-economy macroeconomics; exchange rates and current account: An empirical analysis

This study aims at analyzing the macroeconomic structure in Turkey in the light of the hypotheses put forward by the new open economy macroeconomics. The study mainly focuses on the analysis of the Redux model, the cornerstone of new open economy macroeconomics, which is largely shaped by the studies of Obstfeld and Rogoff, and which is one of the dimensions of the new-keynesian theory analyzing open economies. Besides, in the study, whether or not the macroeconomic structure in Turkey is compatible with this theory and model has been analyzed using empirical methods. In the study, structural VAR model, including macroeconomic variables, such as money supply, real exchange rates, output and current account has been used for the purpose of applying long-run restrictions. According to the results of the empirical analysis, it can be stated that the macroeconomic structure in Turkey complies with the hypotheses of the new open economy macroeconomics to a great extent. Considering the current account, which is the focal point of the study, it has been found out that the effect of monetary shocks are valid only in short run, furthermore it has been determined that the effects of real exchange and output level on the changes in the current account come to the fore. Key Words : New Open-Economy Macroeconomics, Structural VAR Method, Current Account