Current Account Deficit and its Sustainability: Turkish Case

43299

Sustainability of the current account balance of a country is one of the main indicators of macroeconomic stability. Unsustainable foreign trade deficit gives rise to unsustainable current account deficit in the long run. Existence of a long-run relationship between export and import means that the short run foreign trade deficit is sustainable in the long-run and macroeconomic policies are effective for the provision of the long-run foreign trade balance. In this paper we aim to investigate the sustainability of current account deficit in Turkey by examining the long-run relationship between export and import for the period 1980-2014. The long-run cointegration relationship between export and import are tested by the ARDL bound testing approach developed by Pesaran, Shin and Smith (2001). According to the results, although there is a long-run relationship between export and import and the current account deficit are sustainable in a strong form, there is a strong belief that the sustainability of current account deficit tend to turn into the weak form in near future.

351

Sustainability of current account deficit , cointegration , export , import

Journal Of Graduate School Of Social Sciences

362

Journal Of Graduate School Of Social Sciences