The effects of short-term capital movements on developing country economies; The example of G-20 countries and Türkiye

The volume of short-term capital movements today causes multifaceted effects on developing country economies. The funds generated by the increasing money supply in the global economy with the traditional and unconventional monetary policies implemented by the central banks of developed countries increasingly affect macroeconomic variables as short-term capital movements to developing countries. Developing countries, which experience significant problems in financing savings, current and budget deficits, are trying to make their borrowing dynamics sustainable with short-term capital inflows. At the same time, with sudden capital outflows, existing financing problems are further increased and lead to economic and financial crises. In the first part of this study, the theoretical framework regarding short-term capital movements is explained and evaluated. In the second part, the macroeconomic indicators of the G-20 group countries, which are the sample of the study, are examined with tables. The effects of the expansionary monetary policies of the central banks of developed countries within this group and the increasing money supply funds in the global economy on the economies of developing countries with high debt rates, which also have current deficits, are examined and the crises experienced are briefly evaluated. In the third section, the financial liberalization process and crises experienced by Turkey, which is in the group, are explained and the effects of short-term capital movements on macroeconomic variables are discussed. In the fourth section, the short-term capital movements, per capita national income, current deficit, public expenditures, inflation and investments of Argentina, Brazil, India, Indonesia, South Korea, Mexico and Turkey, which are developing countries with high debt rates and current deficits among the G-20 group countries, are analyzed with PVAR using the data for the period 1990 - 2023. In the analysis, the stationarity of the series, cross-sectional dependency, cointegration tests, long-term and short-term effects, impulse-response analysis and causality test are examined and the results are evaluated.