Abstract:

Many countries have experienced a high current account deficit without having any financial issues due to rapid increase in capital movements. However, these deficits also increase the fragility of economies against external shocks. Therefore, the subject of whether the current account deficit is sustainable is a very important issue for every country, that has a current account deficit. Turkey’s economy also faces current account deficit continuously similar to other developing countries. As the current account deficit plays a role in economic crisis, it is important to determine whether current account deficits are sustainable or not and if not, the policies required to be implemented. In this study based on model developed by Husted (1992), the sustainability of current account deficit is analysed with long term relationship between export and import. For this purpose, the cointegration degree of series was analysed through generalized Dickey Fuller (ADF) and Phillips-Perron (PP) unit root test, using the monthly data of 1996:01-2018:08, and afterwards the long term relation between series was searched by Johansen cointegration method. Although the test results revealed that the current account deficit sustainability is in a lower level for Turkey, it was found out that there is a long term relationship between import and export. Keywords: Turkish Economy, Current Account Deficit, Sustainability, Cointegration.

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