Current account sustainabilty

This study examines different theorical approaches to the trade deficitconcept. Having explained theorical approaches, a great emphasis was given todiscussions on current account sustainability. In this regard the selectedmacroeconomic variables, which are believed to be related with sustainability, wereanalyzed in line with liberalization policies employed in 1990s in Turkey. In addition tothat, the solvency analysis being constucted within the framework of macroeconomicaccounting procedures yielded the result that in order to have sustainable currentaccount in the future, the non-interest current account should give surplus in present.However, it should also be noted that it is not convenient to determine a generallyaccepted ratio for anayzing the sustainability of current account deficits. Therefore, itis believed that sustainability analyses supported with macroeconomic data analyseswould render it possible to make better judgements about the subject. In that sense,reel exchange rate appreciation, the composition of domestic investments andcurrent account give negative signals, whereas the diminishing public sector deficits,growing national income and increasing foreign direct investments give positivesignals for current account sustainability.Key Words: Current Account Deficit, Sustainability, Capital Flows.