Key determinants of current account deficit in Turkish economy: An analysis for the post 2001 financial crises period

Current account deficit is a major problem in Turkish economy for the post 2001 financial crises period. The economy has grown by giving current account deficit in this period. Current account deficit has been financed by mostly short term foreign capital. Such financing structure causes critical fragilities for the economy. This study aims to find key determinants of current account deficit in the Turkish economy for the post 2001 crises period. We tested both long and short term effects of saving deficit, economic growth rate, oil prices, real effective exchange rate and terms of trade on the current account of Turkey by using ARDL bound test approach. Estimations were conducted by using quarterly data for the 2002-2017 period. According to finding of study, saving deficit is the most important determinant of current account deficit for both long and short term. Increase in the saving deficit affects current account negatively. Economic growth and real effective exchange rate has negative effect on the current account only in the long term. Oil prices have also negative effect on the current account for the both long and short term. We lastly confirm that terms of trade have positive impact on the current account only for the short term.