Consumption Smoothing and The Current Account: Turkey's Experience, 1987-1995

Date

1997

Author

Selçuk, Faruk

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An intertemporal consumption-smoothing approach is adopted to examine Turkish balance of payments over the period 1987-1995. The current account of a country will be in deficit whenever there is an cxpcctcd rise in the national cash flow defined as gross national product less investment less government spending. Similarly, the current account should give a surplus if there is an cxpcctcd fall in the national cash flow. The findings of this paper indicate that Turkey did not (or could not) smooth consumption during the sample period, suggesting that effective capital mobility was less than perfect. As a result, realized consumption in Turkey was more volatile than the estimated optimum consumption. Another implication of the results is that Turkey was credit-constrained in international markets and could not exercise optimal borrowing from the rest of the world.

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https://hdl.handle.net/11511/112305

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Department of Economics, Article