THE RELATIONSHIP OF CURRENT ACCOUNT DEFICIT AND ECONOMIC GROWTH ON REGIONAL BASIS: THE CASE OF TURKEY

Abstract

Current account deficit is always of great importance in developing and foreign-dependent countries such as Turkey. In this direction, the relationship between the current account deficit and the Gross Domestic Product (GDP), which is used to represent economic growth in Turkey for the period 2004-2020 on a regional basis, has been examined by panel data analysis methods. According to the results of the cointegration test, it has been determined that the current account deficit and GDP move together in the long run in all regions except the Black Sea Region. On the other hand, one-way causality from the GDP to the current account deficit has been determined for the Central and Southeastern Anatolia regions, and it is possible to make a comment that foreign borrowing is preferred as economic growth is achieved for these regions. However, for the Black Sea and Marmara regions, one-way causality was found from current account deficit to GDP. Accordingly, it has been concluded that there may be economic growth dependent on the current account deficit for the Marmara and Black Sea regions. Finally, it is understood that there are regionally different economic structures and this results in different findings. The findings provide important indications that policymakers should take decisions according to regional characteristics.