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ENERGY PRICE SHOCKS AND DYNAMICS OF CURRENT ACCOUNT IN TURKEY: A FAVAR APPROACH

Year 2019, Volume 6, Issue 3, 135 - 141, 30.09.2019
https://doi.org/10.17261/Pressacademia.2019.1112

Abstract

Purpose- In this article, we examine the linkages between current account and energy prices, namely crude oil, coal and natural gas in Turkey the years between 2005 and 2016.

Methodology- This article investigates how the changes in the energy prices affect the current account in Turkey. For this purpose, a Factor-Augmented Vector Auto Regression (FAVAR) model is used with economic data from the Turkish economy and world commodity price indexes to obtain empirical results for current account dynamics in the Turkish economy. The impact of various factors that include crude oil prices, coal prices, natural gas prices and fuel (Energy) index (Crude oil, natural gas, and coal price indices) data have been studied by obtaining impulse response functions.

Findings- Natural gas prices gradually affect the current account. The impact is permanent after a period indicating a very limited elasticity. Oil prices have an immediate The current on the current account. Cycles, in the long run, indicate some degree of elasticity. The negative effect of coal price on the current account deficit occurs with a significant delay. Crude oil price index shocks graphs and fuel index, which includes oil price, coal price and natural gas, and crude oil price shocks graphs are very similar.

Conclusion- In this comprehensive study, we can conclude that crude oil prices, coal prices, natural gas prices deteriorate current account balance. From all of the energy indices, the crude oil price is the most effective on the current account.

References

  • Ang, H. Y., Sek, S. K. (2011). Empirical Investigation on the Determinants of Current Account Balances. International Journal of Advanced Computer Sciences 1(4): 146–151. Bagzibagli, K., (2012). Monetary Transmission Mechanism And Time Variation In The Euro Area. Department Of Economics Discussion Paper, 12-12. University Of Birmingham
  • Barnett, A., Straub, R. 2008. What Drives U.S. Current Account Fluctuations? European Central Bank Working Paper Series, No.959.
  • Barsky, R. B. & Kilian, L. (2004). Oil and Macroeconomy Since the 1970s. Journal of Economic Perspectives,18(4), 115-134.
  • Basarır, Ç., Erkaçar, M. E. (2016). An Analysis of the Relationship between Crude Oil Prices. Current Account Deficit and Exchange Rates: Turkish Experiment. International Journal of Economics and Finance, Vol. 8, No. 11.
  • Bayraktar, Y., Taha, E., Yıldız, F. (2016). A causal relationship between oil prices current account deficit, and economic growth: an empirical analysis from fragile five countries, Ecoforum Journal 5 (3).
  • Berk, C., Cin, K. O. (2018). On Energy Dependence, Current Account Deficit and Population in Turkey. Open Journal of Business and Management, 6, 183-192.
  • Bernanke, B., Boivin, J., Eliasz, P. (2005). Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach. Quarterly Journal of Economics, 120(1), 387-422.
  • Besel, F. (2017). Oil Prices Affect Current Account Deficit: Empirical Evidence from Turkey. Journal of Applied Research in Finance and Economics, v. 3, n. 2, p. 13-21.
  • Corden, W.M. (1994). Does the Current Account Matter?. Economic Policy, Exchange Rates and the International System, W.M. Corden, University of Chicago Press.
  • Erdogan, S., Bozkurt, H. 2009. Turkiye’de Cari Acigin Belirleyicileri: MGARCH Modelleri ile Bir Inceleme, Maliye Finans Yazilari 23(84): 135–172.
  • Geweke, J. (1977). The Dynamic Factor Analysis of Economic Time Series Models, Social System Research Institute, University of Wisconsin - Madison
  • Hamilton, J. D. (1983). Oil and Macroeconomy since World War II. Journal of Political Economy, 91, 228-248.
  • Hamilton, J. D. (1988). Are the macroeconomic effect of oil-price changes symmetric? A comment. Carniege-Rochester Conference Series
  • Hamilton, J. D. (1996). That Is What Happened to The Oil Price-Macroeconomy Relationship. Journal of Monetary Economics, 38 (1996), 215-220.
  • Hamilton J. D, (2003). What is an oil shock? Journal of Econometrics. 113(2), 363–398.
  • Hamilton J. D., Herrera A. M. (2004). Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Comment. Journal of Money, Credit and Banking 36(2): 265–286.
  • Kayikci, F. (2012). Determinants of the Current Account Balance in Turkey: Vector Auto Regression (VAR) Approach. African Journal of Business Management, 6(17): 5725–5736.
  • Kilian, L. (2009), Not All Oil Price Shocks Are Alike: Disentangling Demand And Supply Shocks In The Crude Oil Market. American Economic Review, 99(3): 1053–1069.
  • Longe, A.E., Adelokun, O., Omitogun, O. (2018). The Current Account and Oil Price Fluctations Nexus in Nigeria. Journal of Competitiveness, Vol. 10, Issue 2, pp. 118 – 131.
  • Özata, E. (2014). Sustainability of Current Account Deficit with High Oil Prices: Evidence from Turkey. International Journal of Economic Sciences, 3(2), 71–88.
  • Özlale, Ü., Pekkurnaz, D. (2010). Oil Prices and Current Account: A Structural Analysis for the Turkish Economy. Energy Policy, 38, 4489-4496.
  • Qurat-ul-Ain, S., Tufail, S. (2013). The effect of Oil Price Shocks on the Dynamic Relationship Between Current Account and Exchange Rate:Evidence From D-8. The Pakistan Development Review, Vol. 52, No. 4,
  • Uysal, D., Yılmaz, K. Ç., Taş, T. (2015). Enerji İthalatı ve Cari Açık İlişkisi: Türkiye Örneği. Muş Alpaslan Üniversitesi Sosyal Bilimler Dergisi, v. 3, n. 1, p.63-78.
  • Vidal, O. A., Ruiz, A.U. (2016). The Current Account Balance and the Oil Price Shock. BBVA Research Emerging Markets Economic Watch, Economic Analysis, April 2016
  • Yalta, Y.A., Yalta, A. T. (2017). Dependency on Imported Oil and Its Effects on Current Account, Energy Sources, Part B: Economics, Planning, and Policy, Vol.12, No:10, 859-867.

Year 2019, Volume 6, Issue 3, 135 - 141, 30.09.2019
https://doi.org/10.17261/Pressacademia.2019.1112

Abstract

References

  • Ang, H. Y., Sek, S. K. (2011). Empirical Investigation on the Determinants of Current Account Balances. International Journal of Advanced Computer Sciences 1(4): 146–151. Bagzibagli, K., (2012). Monetary Transmission Mechanism And Time Variation In The Euro Area. Department Of Economics Discussion Paper, 12-12. University Of Birmingham
  • Barnett, A., Straub, R. 2008. What Drives U.S. Current Account Fluctuations? European Central Bank Working Paper Series, No.959.
  • Barsky, R. B. & Kilian, L. (2004). Oil and Macroeconomy Since the 1970s. Journal of Economic Perspectives,18(4), 115-134.
  • Basarır, Ç., Erkaçar, M. E. (2016). An Analysis of the Relationship between Crude Oil Prices. Current Account Deficit and Exchange Rates: Turkish Experiment. International Journal of Economics and Finance, Vol. 8, No. 11.
  • Bayraktar, Y., Taha, E., Yıldız, F. (2016). A causal relationship between oil prices current account deficit, and economic growth: an empirical analysis from fragile five countries, Ecoforum Journal 5 (3).
  • Berk, C., Cin, K. O. (2018). On Energy Dependence, Current Account Deficit and Population in Turkey. Open Journal of Business and Management, 6, 183-192.
  • Bernanke, B., Boivin, J., Eliasz, P. (2005). Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach. Quarterly Journal of Economics, 120(1), 387-422.
  • Besel, F. (2017). Oil Prices Affect Current Account Deficit: Empirical Evidence from Turkey. Journal of Applied Research in Finance and Economics, v. 3, n. 2, p. 13-21.
  • Corden, W.M. (1994). Does the Current Account Matter?. Economic Policy, Exchange Rates and the International System, W.M. Corden, University of Chicago Press.
  • Erdogan, S., Bozkurt, H. 2009. Turkiye’de Cari Acigin Belirleyicileri: MGARCH Modelleri ile Bir Inceleme, Maliye Finans Yazilari 23(84): 135–172.
  • Geweke, J. (1977). The Dynamic Factor Analysis of Economic Time Series Models, Social System Research Institute, University of Wisconsin - Madison
  • Hamilton, J. D. (1983). Oil and Macroeconomy since World War II. Journal of Political Economy, 91, 228-248.
  • Hamilton, J. D. (1988). Are the macroeconomic effect of oil-price changes symmetric? A comment. Carniege-Rochester Conference Series
  • Hamilton, J. D. (1996). That Is What Happened to The Oil Price-Macroeconomy Relationship. Journal of Monetary Economics, 38 (1996), 215-220.
  • Hamilton J. D, (2003). What is an oil shock? Journal of Econometrics. 113(2), 363–398.
  • Hamilton J. D., Herrera A. M. (2004). Oil Shocks and Aggregate Macroeconomic Behavior: The Role of Monetary Policy: Comment. Journal of Money, Credit and Banking 36(2): 265–286.
  • Kayikci, F. (2012). Determinants of the Current Account Balance in Turkey: Vector Auto Regression (VAR) Approach. African Journal of Business Management, 6(17): 5725–5736.
  • Kilian, L. (2009), Not All Oil Price Shocks Are Alike: Disentangling Demand And Supply Shocks In The Crude Oil Market. American Economic Review, 99(3): 1053–1069.
  • Longe, A.E., Adelokun, O., Omitogun, O. (2018). The Current Account and Oil Price Fluctations Nexus in Nigeria. Journal of Competitiveness, Vol. 10, Issue 2, pp. 118 – 131.
  • Özata, E. (2014). Sustainability of Current Account Deficit with High Oil Prices: Evidence from Turkey. International Journal of Economic Sciences, 3(2), 71–88.
  • Özlale, Ü., Pekkurnaz, D. (2010). Oil Prices and Current Account: A Structural Analysis for the Turkish Economy. Energy Policy, 38, 4489-4496.
  • Qurat-ul-Ain, S., Tufail, S. (2013). The effect of Oil Price Shocks on the Dynamic Relationship Between Current Account and Exchange Rate:Evidence From D-8. The Pakistan Development Review, Vol. 52, No. 4,
  • Uysal, D., Yılmaz, K. Ç., Taş, T. (2015). Enerji İthalatı ve Cari Açık İlişkisi: Türkiye Örneği. Muş Alpaslan Üniversitesi Sosyal Bilimler Dergisi, v. 3, n. 1, p.63-78.
  • Vidal, O. A., Ruiz, A.U. (2016). The Current Account Balance and the Oil Price Shock. BBVA Research Emerging Markets Economic Watch, Economic Analysis, April 2016
  • Yalta, Y.A., Yalta, A. T. (2017). Dependency on Imported Oil and Its Effects on Current Account, Energy Sources, Part B: Economics, Planning, and Policy, Vol.12, No:10, 859-867.

Details

Primary Language English
Subjects Management
Journal Section Articles
Authors

Bige KUCUKEFE This is me (Primary Author)

0000-0003-1945-3037

Publication Date September 30, 2019
Published in Issue Year 2019, Volume 6, Issue 3

Cite

APA Kucukefe, B. (2019). ENERGY PRICE SHOCKS AND DYNAMICS OF CURRENT ACCOUNT IN TURKEY: A FAVAR APPROACH . Journal of Economics Finance and Accounting , 6 (3) , 135-141 . DOI: 10.17261/Pressacademia.2019.1112

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