ENERGY PRICE SHOCKS AND DYNAMICS OF CURRENT ACCOUNT IN TURKEY: IS THIS TIME DIFFERENT?

Year 2019, , 231 - 235, 30.07.2019

Bige Kucukefe

https://doi.org/10.17261/Pressacademia.2019.1097

Abstract

Purpose- In this article, we examine the link between current account and
energy prices, namely crude oil, coal and natural gas in Turkey the years
between 2005 and 2016.

Methodology- This article investigates how the
changes in the energy prices affect the current account in Turkey. For this
purpose, a Factor-Augmented Vector Auto Regression (FAVAR) model is used with
economic data from the Turkish economy and world commodity price indexes to
obtain empirical results for current account dynamics in the Turkish economy.
The impact of various factors that include crude oil prices, coal prices,
natural gas prices data have been studied by obtaining impulse response
functions.

Findings- Natural gas prices gradually affect the current account. The
impact is permanent after a period indicating a very limited elasticity. Oil
prices have an immediate impact on the current account. Swings, in the long
run, indicate some degree of elasticity. The negative effect of coal price on
the current account deficit occurs with a significant delay.

Conclusion- We can conclude that, from all of the energy indices, the crude
oil price is the most effective on the current account.

Keywords

Current account, oil prices, FAVAR model, Turkish economy

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