Current account deficit - growth relationship: The case of Turkey

In recent years, current account deficit has become one of the most serious macroeconomic problems for Turkey. It is of great importance as the increase in the current account deficit figure is perceived as a sign for a potential crisis in developing countries. It is accepted by almost everybody that one of the main reasons of current account deficit is economic growth. Therefore, this study investigates the relationship between economic growth and current account deficit.In the first part of this study, historical background of current account deficit in Turkey is mentioned besides the concepts related with it and balance of payment. In the second part, the relationship between current account deficit and economic growth is presented theoretically. The third part covers the literature review of the subject. In the last part, current account deficit and growth relationship for the period 1992?2011 is examined with econometric methods. According to the results of the causality test, a causal relationship between the current account deficit and growth has been identified.