Turkey : An Empirical Assessment of the Determinants of the Current Account Balance
Turkey has moved rapidly from a current account that was relatively in balance up to the turn of the millennia, to sustaining relatively large current account deficits over the past 15 years. Using annual data from 1986 to 2017 and a jackknife mode...
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| Format: | Working Paper |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/885361565870957375/Turkey-An-Empirical-Assessment-of-the-Determinants-of-the-Current-Account-Balance http://hdl.handle.net/10986/32275 |
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okr-10986-322752022-09-20T00:14:08Z Turkey : An Empirical Assessment of the Determinants of the Current Account Balance Knight, David Nedeljkovic, Milan Portugal-Perez, Alberto CURRENT ACCOUNT BALANCE EXTERNAL SECTOR CURRENT ACCOUNT DEFICIT EXPORTS MACROECONOMIC MANAGEMENT JACKKNIFE MODEL Turkey has moved rapidly from a current account that was relatively in balance up to the turn of the millennia, to sustaining relatively large current account deficits over the past 15 years. Using annual data from 1986 to 2017 and a jackknife model-averaging estimator, the paper estimates the relationship between the current account balance and a set of determinants that are broadly consistent with the cross-country literature. These determinants include private sector credit, public expenditure, real exchange rate changes, gross domestic product growth relative to the rest of the world, trade openness, international oil prices, foreign direct investment levels, past net foreign assets, inflation volatility, and global levels of uncertainty. The analysis then decomposes the predicted current account balance for five-year periods to illustrate the factors that have driven the current account over time. Over 2003-07, a large current account deficit became established in Turkey, driven by an expansion of credit to households and rapid gross domestic product growth, coupled with improved macroeconomic stability that supported higher spending and therefore imports. Since then, the negative effect of household credit has abated, but was replaced in 2008-17 by an expansion of credit to the corporate sector as a driver of the current account deficit. The current account balance in Turkey is also found to be less persistent than is typically found in the cross-country literature, implying that it adjusts more rapidly in response to shocks. 2019-08-16T16:45:02Z 2019-08-16T16:45:02Z 2019-08 Working Paper http://documents.worldbank.org/curated/en/885361565870957375/Turkey-An-Empirical-Assessment-of-the-Determinants-of-the-Current-Account-Balance http://hdl.handle.net/10986/32275 English Policy Research Working Paper;No. 8982 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Europe and Central Asia Turkey |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
CURRENT ACCOUNT BALANCE EXTERNAL SECTOR CURRENT ACCOUNT DEFICIT EXPORTS MACROECONOMIC MANAGEMENT JACKKNIFE MODEL |
| spellingShingle |
CURRENT ACCOUNT BALANCE EXTERNAL SECTOR CURRENT ACCOUNT DEFICIT EXPORTS MACROECONOMIC MANAGEMENT JACKKNIFE MODEL Knight, David Nedeljkovic, Milan Portugal-Perez, Alberto Turkey : An Empirical Assessment of the Determinants of the Current Account Balance |
| geographic_facet |
Europe and Central Asia Turkey |
| relation |
Policy Research Working Paper;No. 8982 |
| description |
Turkey has moved rapidly from a current
account that was relatively in balance up to the turn of the
millennia, to sustaining relatively large current account
deficits over the past 15 years. Using annual data from 1986
to 2017 and a jackknife model-averaging estimator, the paper
estimates the relationship between the current account
balance and a set of determinants that are broadly
consistent with the cross-country literature. These
determinants include private sector credit, public
expenditure, real exchange rate changes, gross domestic
product growth relative to the rest of the world, trade
openness, international oil prices, foreign direct
investment levels, past net foreign assets, inflation
volatility, and global levels of uncertainty. The analysis
then decomposes the predicted current account balance for
five-year periods to illustrate the factors that have driven
the current account over time. Over 2003-07, a large current
account deficit became established in Turkey, driven by an
expansion of credit to households and rapid gross domestic
product growth, coupled with improved macroeconomic
stability that supported higher spending and therefore
imports. Since then, the negative effect of household credit
has abated, but was replaced in 2008-17 by an expansion of
credit to the corporate sector as a driver of the current
account deficit. The current account balance in Turkey is
also found to be less persistent than is typically found in
the cross-country literature, implying that it adjusts more
rapidly in response to shocks. |
| format |
Working Paper |
| author |
Knight, David Nedeljkovic, Milan Portugal-Perez, Alberto |
| author_facet |
Knight, David Nedeljkovic, Milan Portugal-Perez, Alberto |
| author_sort |
Knight, David |
| title |
Turkey : An Empirical Assessment of the Determinants of the Current Account Balance |
| title_short |
Turkey : An Empirical Assessment of the Determinants of the Current Account Balance |
| title_full |
Turkey : An Empirical Assessment of the Determinants of the Current Account Balance |
| title_fullStr |
Turkey : An Empirical Assessment of the Determinants of the Current Account Balance |
| title_full_unstemmed |
Turkey : An Empirical Assessment of the Determinants of the Current Account Balance |
| title_sort |
turkey : an empirical assessment of the determinants of the current account balance |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/885361565870957375/Turkey-An-Empirical-Assessment-of-the-Determinants-of-the-Current-Account-Balance http://hdl.handle.net/10986/32275 |
| _version_ |
1764476204313739264 |