Abstract:

It is necessary to ensure investment saving equality in order to provide an internal economic balance. However, the amount of total savings in Turkey is well under the amount of total investment, therefore the saving gap problem arises. In such circumstances, it is essential to use external resources to resolve the saving inadequacy. This issue results in over valuation of domestic currency, reduces competitiveness of the country and increases current deficit. Additionally, saving inadequacy increases foreign source dependency and current deficit which may raise sensitivity of the economy to financial crises. Our work analyse the relationship between current balance, savings, investment and growth which are the most important macroeconomic variables in Turkey. We use annual data for 1980-2014 period and consider the ratio of these important variables’ series to GDP. Before we examine the causality relation between the series, we first test stationarity of these series by using Philips Peron unit root analysis. According to the unit root test results, while growth and current balance series are stationary at level, savings and investment series are stationary at first difference. We apply Toda-Yamato test for the variables which are stationary at different levels, however standard Granger Causality analysis is used for the variables which are stationary at same level. Our findings suggest that there is no causality among growth, savings and investment. However, we find a unidirectional causality running from growth, savings and investment to current balance. This finding supports the view that Turkey’s current deficit significantly increases during high economic growth periods.

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