Examining the relationship of current account deficit with economic factors and energy: A study on OECD countries

As a result of the inability to meet the demand increases with the economic growth of the countries and the fulfillment of demand needs together with imports, a foreign exchange deficit occurs, and this leads to an increase in the current account deficit. For this reason, countries need to establish a balanced economic structure by considering factors such as economic growth, financial development, foreign direct investments and energy consumption that affect the current account deficit. It is seen that there are many variables that affect the current account deficit. The aim of this study is to examine the causality relations between the economic and energy and factors affecting the current account deficit with the current account deficit. Within the scope of the study, the 1981-2020 period data of selected OECD countries were used and the relations between the variables of economic growth, financial development, foreign direct investments and energy consumption with the current account deficit were analyzed. In the application part of the study, first of all, the relationship between the variables forming the panel and the cross-sectional dependence with each other was analyzed. The cross-section dependency test of Breush and Pagan (1980) and Pesaran, Ullah and Yamagata (2008) was used. In the continuation of the application, Pesaran's (2007) CADF unit root test was applied. While Emirmahmutoğlu Kose (2011) panel causality test was applied for panels that were stationary at different levels, Dumitrescu (2012) causality test was applied for panels that were stationary at the same level. As a result of the applications, one-way causality was determined between the current account deficit and economic growth, while a two-way causality relationship was observed between the current account deficit and foreign direct investment. In addition, it has been determined that there is a one-way causality relationship between the current account deficit and energy consumption. When the previous studies in the literature were examined, it was determined that the results obtained by Turkoglu (2018) were similar to the findings of this study. In future studies, examining the factors affecting the current account deficit can be improved by using different variables such as unemployment, renewable energy, which are not used in this research.