IS SAVING INVESTMENT DEFICIT AND CURRENT ACCOUNT DEFICIT IN TURKEY CO-INTEGRATED? AN INTER-TEMPORAL APPROACH

The theoretical model used in the study is based on the intertemporal approach developed by Obstfeld and Rogoff (1994, 1996), which is accepted as the primary reference in current account balance analysis. According to this intertemporal approach, the current account balance results from forward-looking dynamic saving and investment decisions. In this study, the effect of savings and investment balance on the current account balance in Turkey was analyzed using various cointegration methods for the period 1975-2019. Engle-Granger and Johansen cointegration tests were used to provide a comparison in cointegration tests. As a result of the analysis, a long-term relationship was found between the ratio of the current account balance to Gross Domestic Product, the ratio of investments to Gross Domestic Product, and the ratio of savings to Gross Domestic Product. In addition, the cointegration estimators FMOLS, DOLS, and CCR were used. The findings revealed a negative relationship between the savings-investment balance and the current account balance.