A Different Perspective Analysis of the Effects of Economic Growth and External Debt on the Current Account

Abstract

One of the most important problems of Turkey's economy is to have continuous current account deficit. In order to ensure macroeconomic balances, the current account deficit should be sustainable. In this context, the effects of the economic growth, public and private sector external debt stocks’ on the sustainability of the current account deficit are handled with a different perspective. In this context, the historical decomposition method obtained from vector autoregression (VAR) model was used by using quarterly data between the periods of 1992Q1-2017Q3. In order to measure the effect of variables on current transactions, unlike other models, a positive shock is given to all variables in every period. As a result, the variables, that are discussed, they do not have a regenerative effect on the sustainability of the current account deficit. Until 2001, the negative effects of public sector debts on the sustainability of current transactions are observed. After 2001, it was estimated that the private sector's debts had a negative effect on the sustainability of current transactions andprivate sectors couldn’t pay their debts. This means that the private sector will have a strong share in a new economic crisis.

Keywords

• Current account balance,Economic growth,External debt

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