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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: An Investigation on the Relationship Between Credit Volume and Current Account Deficit in Turkey
Author(s): Aydanur Gacener Atış, Fatih Saygılı
Volume: 5
Number: 4
Year: 2014
Page: 129-141
ISSN: 1309-2448
Abstract
Following the 2008 global financial crisis, Turkey’s current account deficit has deteriorated due to a rapid growth of total credit volume and the appreciation of domestic currency. In 2010, the Central Bank of Turkey implemented a new monetary policy to improve domestic financial stability. The new policy was designed to maintain a sustainable current account deficit by reducing total domestic credit volume. The aim of this paper is to explore the impact of the domestic credit volume on Turkey’s current account deficit. The relationship between the credit growth and current account is analyzed by using quarterly data over the period 1998:1-2013:1. An econometric VECM technique and Granger Causality tests are used to analyze and to detect the long-run relationship between variables. Our findings indicate that the total credit growth has a limited but an adverse effect on the current account deficit.
Keywords: Current account deficit, credit volume, cointegration, granger causality, vector error correction mechanism
JEL Classification: E42, E51, F32

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