The effect of crude oil prices on current account deficit and inflation: An application in Turkey

Petroleum is one of the most important energy resources in the world, and it has an important place in the total import amount of net oil importing countries. The increase in oil prices creates a negative impact on the current account balance and inflation rate of these countries. In this study, the effect of fluctuations in oil prices on Turkey's current account deficit and inflation rate is discussed. In this framework, firstly, the hypothesis of "crude oil prices increase causes current account deficit", and secondly, the hypothesis of "crude oil price increase causes an increase in inflation" was questioned. Data for 50 periods were taken into account, covering the 2009:1-2021:2 quarterly periods. Regarding the effect of oil prices on the current account deficit, current account deficit/GDP, brent oil prices, real effective exchange rate and GDP growth rates are included in the research as variables. Regarding the effect of oil prices on inflation, CPI, brent oil prices, US Dollar and interest rate are included in the research as variables. ARDL analysis and Toda-Yamamoto causality test were performed in both models. As a result of the ARDL analysis, it was concluded that the increase in oil prices increased Turkey's current account deficit. In the second hypothesis, it was concluded that the increase in oil prices increased the inflation rate. In the Toda-Yamamoto analysis, however, no causal relationship was found between oil price-current account deficit and oil price-inflation. KEY WORDS: Oil Price, Current Account Deficit, Current Account Balance, Balance of Payments, Inflation.