Title: Revisiting current account sustainability in Turkey: analysis via Fourier techniques

Authors: Onder Ozgur; Muhammed Sehid Gorus; Erdal Tanas Karagol

Addresses: Department of Economics, Ankara Yıldırım Beyazıt University, Esenboğa Campus, Çubuk/Ankara, Turkey ' Department of Economics, Ankara Yıldırım Beyazıt University, Esenboğa Campus, Çubuk/Ankara, Turkey ' Department of Economics, Ankara Yıldırım Beyazıt University, Esenboğa Campus, Çubuk/Ankara, Turkey

Abstract: The primary purpose of this study is to examine the current account sustainability in Turkey using quarterly data covering the period between 1992:1 and 2017:1. To this end, the study applies two recently developed stationarity and cointegration tests based on intertemporal budget constraint. Both avenues analyse the mean-reverting behaviour of the current account balance using Fourier unit root and cointegration analysis which can scrutinise an unknown number of structural breaks, capture sharp breaks, and approximates them as smooth gradual processes. Empirical findings show that Fourier KPSS unit root test rejects the non-stationarity of current account balance to GDP ratio implying that shocks to current account balance are not persistent. Besides, empirical findings also exhibit weak form sustainability in the short-run whereas its form is strong in the long-run.

Keywords: cointegration analysis; current account sustainability; Fourier techniques; Turkey; unit root analysis.

DOI: 10.1504/IJSE.2019.100671

International Journal of Sustainable Economy, 2019 Vol.11 No.3, pp.219 - 236

Available online: 16 May 2019 *

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