Impact of Credit Expansion on the Current Account Deficit in Turkey: Bound Test Approach

In this study, both political and economic authorities recently been frequently stated that Turkey s total domestic credit volume increase caused a large increase in pressure on the current account deficit is to investigate the allegations. 1992Q1- 2014Q3 period of three months the volume of loans to GDP ratio and the current account deficit to GDP ratio datas are used in the econometric analysis. Between this series for the causality relationship was used Toda-Yamamoto (1995) and Dolado-Lütkepohl (1996) causality tests. To detecting the presence of cointegration was used the bounds testing approach developed by Pesaran et.al. (2001). Long and short-term relationships between the series were analyzed using the method ARDL based on the bound test approach. As a result of the econometric analysis, two-way causality and integration relationship between the series has been identified. The total domestic credit volume expansion was determined that less than expected level of increase to the current account deficit. In the error correction model, dedected that short run deviations were disappeared in about seven months and the series moving together in the long run.