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Is the Turkish Current Account Deficit Sustainable?

Author

Listed:
  • Osman Furkan Abbasoglu

    (Istanbul School of Central Banking, Central Bank of the Republic of Turkey)

  • Ayse Imrohoroglu

    (Marshall School of Business, University of Southern California)

  • Ayse Kabukcuoglu

    (College of Administrative Sciences and Economics, Koc University)

Abstract

During the 2011-2015 period, Turkey's current account deficit as a percentage of GDP was one of the largest among the OECD countries. In this paper, we examine if this deficit can be considered sustainable using the Engel and Rogers (2006) approach. In this framework, the current account of a country is determined by the expected discounted present value of its future share of world GDP relative to its current share. A country, whose income is anticipated to rise relative to the rest of the world is expected to borrow now and run a current account de cit. Our findings suggest that Turkey's current account deficit in 2015 may be considered sustainable if the Turkish economy's share in the world economy could continue to grow at rates similar to the past. The same approach, however, indicates that the current account deficit in 2011, at its peak, was unlikely to be sustainable.

Suggested Citation

  • Osman Furkan Abbasoglu & Ayse Imrohoroglu & Ayse Kabukcuoglu, 2017. "Is the Turkish Current Account Deficit Sustainable?," Koç University-TUSIAD Economic Research Forum Working Papers 1705, Koc University-TUSIAD Economic Research Forum.
    • Handle: RePEc:koc:wpaper:1705
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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1705.pdf
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    More about this item

    Keywords

    Current account; open economy macroeconomics; growth;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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