Is the Turkish Current Account Deficit Sustainable?

Osman Abbasoğlu (), Ayse Imrohoroglu and Ayşe Kabukçuoğlu Dur

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

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.

Keywords: Current account; open economy macroeconomics; growth (search for similar items in EconPapers)
JEL-codes: F32 F41 F43 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2017-02
New Economics Papers: this item is included in nep-ara, nep-cwa and nep-opm
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