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The Sustainability of Current Account Deficits and Tourism Receipts in Turkey

The Sustainability of Current Account Deficits and Tourism Receipts in Turkey Current Account Deficits (CAD) in Turkey have reached significantly high levels in the recent years and discussions around the sustainability of these deficits continue. On the other hand, thanks to its rapid development within the same period, the tourism sector is observed to increase its positive contribution to the current accounts balances. This study is an initiative to highlight the contribution of the tourism sector to the sustainability of the CAD in Turkey. Unit root and Cointegration tests have been used to this end. This approach is applied to the long-run relationship between Exports + Tourism Receipts (X + TR) and Imports + Tourism Expenditures (M + TE) for the period of 1980Q1–2005Q2. We question the weak sustainability hypothesis where the cointegrating vector is (X + TR)t = a + b(M + TE)t + η t . In this vector, if b equals to one and ηt is stationary, then the current account deficits are strongly sustainable, if b is between 0 and 1(0 < b < 1) and ηt is stationary or b = 1 but ηt is non-stationary, then the current account deficits are weakly sustainable and lastly, if there is no cointegration or b = 0, then the current account deficits are unsustainable. The empirical results indicate that CAD in Turkey are unsustainable in spite of the rising shares of tourism receipts in current account balances. Therefore, in Turkey, where exports are exceedingly depended on imports, which makes it not very easy to reduce imports, the only way to ensure that CAD are sustainable is to seek options to further increase the tourism receipts. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The International Trade Journal Taylor & Francis

The Sustainability of Current Account Deficits and Tourism Receipts in Turkey

The International Trade Journal , Volume 22 (1): 24 – Feb 12, 2008
24 pages

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References (51)

Publisher
Taylor & Francis
Copyright
Copyright Taylor & Francis Group, LLC
ISSN
1521-0545
eISSN
0885-3908
DOI
10.1080/08853900701784060
Publisher site
See Article on Publisher Site

Abstract

Current Account Deficits (CAD) in Turkey have reached significantly high levels in the recent years and discussions around the sustainability of these deficits continue. On the other hand, thanks to its rapid development within the same period, the tourism sector is observed to increase its positive contribution to the current accounts balances. This study is an initiative to highlight the contribution of the tourism sector to the sustainability of the CAD in Turkey. Unit root and Cointegration tests have been used to this end. This approach is applied to the long-run relationship between Exports + Tourism Receipts (X + TR) and Imports + Tourism Expenditures (M + TE) for the period of 1980Q1–2005Q2. We question the weak sustainability hypothesis where the cointegrating vector is (X + TR)t = a + b(M + TE)t + η t . In this vector, if b equals to one and ηt is stationary, then the current account deficits are strongly sustainable, if b is between 0 and 1(0 < b < 1) and ηt is stationary or b = 1 but ηt is non-stationary, then the current account deficits are weakly sustainable and lastly, if there is no cointegration or b = 0, then the current account deficits are unsustainable. The empirical results indicate that CAD in Turkey are unsustainable in spite of the rising shares of tourism receipts in current account balances. Therefore, in Turkey, where exports are exceedingly depended on imports, which makes it not very easy to reduce imports, the only way to ensure that CAD are sustainable is to seek options to further increase the tourism receipts.

Journal

The International Trade JournalTaylor & Francis

Published: Feb 12, 2008

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