Current deficit and effects of it in turkish economy

Current deficit, which has been the basic factor that caused developing countries to undergo crisis in recent years. This situation causes foreign debt stocks of the country to increase and creates concerns about the sustainability of the deficits. When the ?current transactions account? is considered disregarding net defect and deficient item under the payments balance, it is equal to the capital and finance movements, in which the change in foreign exchange reserves indicating the correspondent activities of the Central Bank is also included, from the absolute value type. When the current transactions accounts have deficiency, it means that the country has sent money to abroad in an amount over the amount money she earned from abroad. Therefore, the created deficit is settled by becoming indebted to abroad or by selling domestic assets. In a case contrary to this, namely when current transactions account shows excess, capital transfer is made to abroad by domestic residents. As a result, current transactions account indicates the change in our total liabilities to foreign residents or in the assets available in a foreign resident country. Current transactions deficit causes an increase in the net foreign liabilities of the country. At this point, it is significant whether there are powers that prevent increases, which arise in the net foreign liability (debt) position, and ensure a smooth adaptation or whether net foreign asset position shows a tendency of continuing to increase. Many indicators can be listed among the factors that affect the current transactions balance in Turkey such as investment and savings, sectoral distribution of investments, openness of the country to abroad, financial structure of the country, structure of the capital that finance current deficits, foreign trade limits, competition power of the country according to countries, applied foreign exchange program, political stability. Lowness of interests encourages hot money entry, and this decreases foreign exchange rates and excessively adds value to Turkish lira. Excessive value of Turkish lira affects export and import performance to the disadvantage of the country. A sound and sustainable current deficit requires focusing on interest rates that attract hot money and render Turkish lira excessively valuable. The objective of this study is to determine the factors that create current transactions imbalance by examining the economic developments of the period 1995-2000 and to put forth the ways of solution aimed at factors that cause current deficit to gain idleness in our country. Key Words 1. Balance of Payments 2. Balance of Economic 3. Current Deficit 4. Balance of Current Process 5. Capital Fluctuations