Ball and chain effect: Is Turkey's growth rate constrained by current account deficit?

ÖZER M., Malovic M.

PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS, cilt.558, 2020 (SCI-Expanded) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 558
  • Basım Tarihi: 2020
  • Doi Numarası: 10.1016/j.physa.2020.124997
  • Dergi Adı: PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
  • Derginin Tarandığı İndeksler: Science Citation Index Expanded (SCI-EXPANDED), Social Sciences Citation Index (SSCI), Scopus, Academic Search Premier, Aerospace Database, Artic & Antarctic Regions, Compendex, INSPEC, Public Affairs Index, zbMATH, Civil Engineering Abstracts
  • Anahtar Kelimeler: Current account deficit, Credit impulse, Thirlwall law, Frequency domain causality, Time domain causality, Turkey, MODEL
  • Anadolu Üniversitesi Adresli: Evet

Özet

Persistent and unsustainable current account deficits imply continuous foreign borrowing. In this study, we investigate the causal relationship between Turkish current account deficits (CAD) and growth, by using both traditional Granger and Frequency Domain Causality Tests developed by Breitung and Candelon (BC hereafter) over the period of first quarter of 2002 to the first quarter of 2017, since there is scarcely any definitive empirical study out there yet, systematically exploring the causal relationship between GDP growth and current account over short- and longer run. The results of the study indicate that rising CAD unidirectionally causes growth in both short- and medium-run. Thus, since CAD is financed mostly by short-term debt-creating inflows and Turkey is considered to be the most credit-dependent country across all emerging markets, while Turkey's excessive reliance on foreign credit comes at the cost of extremely volatile real GDP growth rates, our result raises many doubts about sustainability and stability of future growth trajectory in Turkey. (C) 2020 Elsevier B.V. All rights reserved.