The Turkish Current Account Deficit

22 Pages Posted: 5 Dec 2018

See all articles by Osman Furkan Abbasoglu

Osman Furkan Abbasoglu

Central Bank of the Republic of Turkey

Ayse Imrohoroglu

University of Southern California - Marshall School of Business

Ayşe Kabukçuoğlu

North Carolina State University

Date Written: January 2019

Abstract

During the 2011–2015 period, Turkey's current account deficit as a percentage of gross domestic product (GDP) was one of the largest among the Organization for Economic Co‐operation and Development countries. In this paper, we examine if this deficit can be considered optimal using the Engel and Rogers's 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 deficit. Our findings suggest that Turkey's current account deficit in 2015 may be considered optimal if the Turkish economy's share in the world economy could continue to grow at rates similar to the past or to the predictions from professional forecasts. The same approach, however, indicates that the current account deficit in 2011, at its peak, was unlikely to be optimal.

JEL Classification: F32, F41, F43

Suggested Citation

Abbasoglu, Osman Furkan and Imrohoroglu, Ayse and Kabukçuoğlu, Ayşe, The Turkish Current Account Deficit (January 2019). Economic Inquiry, Vol. 57, Issue 1, pp. 515-536, 2019, Available at SSRN: https://ssrn.com/abstract=3295894 or http://dx.doi.org/10.1111/ecin.12719

Osman Furkan Abbasoglu (Contact Author)

Central Bank of the Republic of Turkey ( email )

Ankara, Ankara 06050
Turkey

Ayse Imrohoroglu

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States
213-740-6518 (Phone)
213-740-6650 (Fax)

Ayşe Kabukçuoğlu

North Carolina State University ( email )

2801 Founders Dr
Raleigh, NC 27695
United States

HOME PAGE: http://aysekabukcuoglu.weebly.com

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