Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108660
Authors: 
Kara, Hakan
Sarıkaya, Çağrı
Year of Publication: 
2014
Series/Report no.: 
Koç University-TÜSİAD Economic Research Forum Working Paper Series 1420
Abstract: 
Turkey's high current account deficit has been at the core of macroeconomic policy discussions in recent years. Quantifying the role of cyclical factors in driving the current account fluctuations is essential for designing an appropriate policy response and evaluating the impact of policy measures. Using a simple methodology, this study extracts the cyclical component of the current account in Turkey, with special reference to its three main drivers; namely foreign demand, domestic demand and foreign trade prices. We argue that the underlying (cyclically-adjusted) current account deficit has displayed a persistent deteriorating trend during 1998-2007 period before stabilizing around 6 percent of GDP in recent years. Decomposing the current account deficit into cyclical and non-cyclical factors allows us to assess the impact of recent policy actions. Our computations suggest that, although the policies pursued by the central bank and other authorities since 2011 have removed the cyclical part to a great extent, there remains a sizeable component of the deficit to be dealt with more structural policies.
Subjects: 
Current Account Balance
Foreign Trade
Business Cycle
Cyclical Adjustment
Filtering
JEL: 
E32
F14
F32
Document Type: 
Working Paper

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