Effect of foreign direct investments on current account deficit (2000-2018): Case of Turkey

In this study, the effect of foreign direct investments on the current account deficit has been investigated based on the years 2000-2018. The relationship between foreign investment and the current account deficit using Turkey's data for the period 2000:Q1- 2018:Q4 has been tested with the help of Granger Causality analysis and long and short-term analysis.With the effect of the Transition Program for Strengthening The Economy implemented after 2000, the current account deficit in the country's economy has been analyzed using the data of recent years and it is aimed to add an up-to-date study to the literature. According to the analysis findings, a one-way causality link was detected from the current account deficit to foreign direct investments. In addition, export and import variables affecting the current account deficit and foreign trade items were included in the analysis and it was empirically supported that both affect the current account deficit and that there is a causal link between these variables to the current account deficit. In parallel with the results of this analysis; Two cointegration relations have been found between current account deficit, foreign direct investments, import and export data. Additionally a positive relationship between current account deficit and foreign direct investments and exports, and a negative relationship between imports and current account deficit. As a result of the long and short term analyzes, it was found to support the literature and it was determined that the deviations would disappear in 2.5 (average 6 months) period and reach the long term balance.