Abstract:

Current account balance is one of the important indicators for the macroeconomic stability and welfare of one country. But however current account deficits have become one of the chronic problems of Turkish economy in recent years. This study examines the relationship between current account balance and economic growth, inflation, real effective exchange rate, foreign direct investment inflows, crude oil prices, portfolio investments, total government gross debt stock, rate of exports meeting imports and Borsa Istanbul 100 index in Turkey during the period 2000:Q4–2013:Q3 by using Granger causality test, impulse-response and variance decomposition analyses. We found that total government gross debt stock, real effective exchange rate, portfolio investments, rate of exports meeting imports and Borsa Istanbul 100 index are Granger causes of current account balance. Moreover we determined that 78,6% of variation in the current account balance were explained by foreign direct investment inflows, portfolio investments, crude oil prices and total government gross debt stock.

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