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Current Issues in Finance, Economy and Politics

Theoretical and Empirical Finance and Economic Researches

by Çağatay Başarir (Volume editor)
©2019 Edited Collection 348 Pages

Summary

The book consists of 21 parts that discuss the developments in economy, finance and politics, theoretically and empirically. There are four main sections: Economics, Banking Sector, Stock Exchange and Financial Markets. Economics sections have six sub sections as monetary policy, economic growth, current deficit, international services trade, Eurasion economic union and public share. The second part of the book consists of six sub sections about the banking sector that is fundamental to the economic structure and the main actor of the financial sector. This main sector discusses the efficiency and performance of the banking sector and also shadow banking. In addition, the banking sector is analysed in the Islamic banking area. Furthermore, the interaction of the banking sector and technological developments are emphasized in a separate section in this part.

Table Of Contents

  • Cover
  • Title Page
  • Copyright Page
  • Preface and Acknowledgments
  • About the editor
  • About the book
  • Citability of the eBook
  • Contents
  • List of Contributors
  • 1 Economic Growth and Current Deficit: An Analysis for OECD Countries
  • 2 Determinants of Regional Economic Growth in Turkey
  • 3 Determination of Public Share in the Turkish Economy and Possible Role of Wealth Fund in Investment and Financing Policies
  • 4 Integration Process in Post-Soviet Eurasia: Eurasian Economic Union
  • 5 Competitiveness of Turkey in the Context of International Services Trade with OECD Countries
  • 6 Does The Monetary Policy of the Central Bank Lead to a Housing Bubble? Empirical Analysis for Turkish Economy
  • 7 The Efficiency and Profitability of the Turkish Banking Sector
  • 8 A Research on the Factors Affecting Profitability in Banks with Ridge Regression Analysis
  • 9 Examination of Islamic Banks Operating in Turkey in Terms of Efficiency and Productivity According to Multi-criteria Decision-Making Methods
  • 10 Credit Risk in the Turkish Banking Sector: A Study on 1990–2017 Period
  • 11 Shadow Banking, Leverage Cycles, and the Great Recession
  • 12 Globalization 4.0 and Banking Sector
  • 13 An Alternative Way of Financing for Entrepreneurs: Crowdfunding
  • 14 Consequences of Money Laundering: An Audit and Governance Perspective
  • 15 The Relationship between Exchange Rates and Interest Rates: The Case of Turkey
  • 16 Inflation-Exchange Rate Relationship: The Case of Turkey
  • 17 Theoretical Modeling Basis of TL/US Dollar Exchange Rate: An Econometric Practice
  • 18 Testing of Overconfidence Hypothesis in Borsa Istanbul
  • 19 Long Memory Model: BIST 100 Index
  • 20 Underpricing in Initial Public Offerings: Turkey, 2011–20131
  • 21 Dividend Policy Studies in Turkey
  • List of Figures
  • List of Tables

List of Contributors

Ahmet Aydın

Assoc. Prof., Bandırma Onyedi Eylul University, aaydin@bandirma.edu.tr

Alban Hetemi

Ph.D., TEB SHA Department Manager/Compliance Division at TEB Bank hetemi.alban@gmail.com

Aytaç Pekmezci

Asst. Prof., Muğla Sıtkı Koçman University, aytac0803@mu.edu.tr

A. Gamze Aytekin

Asst. Prof., Balikesir University, aysegamze@balikesir.edu.tr

A. Rutkay Ardoğan

PhD Student, Ege University, rutkay@gmail.com

Berna Serener

Asst. Prof., European University of Lefke, berna_serener@hotmail.com

Burçay Yaşar Akçalı

Asst. Prof., İstanbul University, burcayy@istanbul.edu.tr

Dilek Demirhan

Assoc. Prof., Ege University, dilek.demirhan@ege.edu.tr

Engin Kurun

Assoc. Prof., Piri Reis University, ekurun@pirireis.edu.tr

Hale Kırer Silva Lecuna

Asst. Prof., Bandırma Onyedi Eylül University, hkirer@bandirma.edu.tr

Haydar Karadağ

Asst. Prof., Recep Tayyip Erdoğan University, haydar.karadag@erdogan.edu.tr

H. Levent Korap

Asst. Prof., Kastamonu University, lkorap@kastamonu.edu.tr

Kurtuluş Bozkurt

Asst. Prof., Aydın Adnan Menderes University, kurtuluş.bozkurt@adu.edu.tr

Mehmet Güçlü

Assoc. Prof., Ege University, mehmet.guclu@ege.edu.tr

M. Kenan Terzioğlu

Assoc. Prof., Trakya University, kenanterzioglu@trakya.edu.tr

Mehmet Sabri Topak

Asst. Prof., Istanbul University, msabri@istanbul.edu.tr

Mehmet Özer

Ph.D., Expert at Capital Markets Board of Turkey, mozer@spk.gov.tr

Melike Torun

Res., Asst. Dr., Istanbul University, meliket@istanbul.edu.tr

←11 | 12→

Muhammed Mustafa Tuncer Çalışkan

Asst. Prof., Bandırma Onyedi Eylül University, mcaliskan@bandirma.edu.tr

Muhittin Tolga Özsağlam

Asst. Prof., European University of Lefke, mozsaglam@eul.edu.tr

Mustafa Şit

Asst. Prof., Harran University, msit@harran.edu.tr.

Onur Duygu

Senior Manager at Odeabank, onurduygu@odeabank.com.tr

Ozan Gülhan

Ph.D., TEB SHA, Head of Compliance Division, ozan.gulhan@teb-kos.com

Ömer Faruk Rençber

Asst. Prof., Gaziantep University, ofrencber@gantep.edu.tr

Özlem Kuvat

Asst. Prof., Balikesir University, ohasgul@balikesir.edu.tr

Sefer Uçak

Asst. Prof., Balikesir University, seferucak@balikesir.edu.tr

Serçin Şahin

Dr., Yildız Technical University, sesahin@yildiz.edu.tr

Serpil Altınırmak

Assoc. Prof., Anadolu University, saltinirmak@anadolu.edu.tr

Yahye Hassan Abdi

Finance Master/Anadolu University

Yasemin Dumrul

Asst. Prof., Kayseri University, ydumrul@erciyes.edu.tr

Zerrin Kılıçarslan

Asst. Prof., Kayseri University, zkaan@erciyes.edu.tr

Kurtuluş Bozkurt and Aytaç Pekmezci

1   Economic Growth and Current Deficit: An Analysis for OECD Countries

Highlights: Together with globalization, especially last quarter century, one of the most discussed subjects in literature of economy is effects of unbalanced current accounts on macroeconomic variables. Integration of developing countries in process of globalization, effects of liberal economy politics applications based on balance of payments on economic growth is the subject discussed on literature of economy. In this chapter, the author will use the OECD countries’ data for 2005:01–2017:04 time interval. With this, panel data set will be formed. And this study will search if there is any causation relationship between current accounts balance and economic growth and analyse that.

Keywords: Economic growth, current deficit, panel data, OECD countries

Introduction

With the globalization process, especially in the last quarter of centuries, one of the most discussed issues in the economic literature has been the effects of current account imbalances on macroeconomic variables. The effects of liberal economic policies applied in the context of the integration of developing countries into the globalization process on the economic growth processes through the balance of payments are one of the most discussed topics in the economic literature. Again, the theoretical approaches, which try to explain the economic crises and are defined as the third-generation crisis models, attach great importance to the current account balance (Üzümcü et al., 2015).

The analysis of the relationship between the current account balance and economic growth has shown that different results have been achieved for the long term using a different sample, period and method. While some studies have found a cointegration relationship in the long term, some studies have not found the same.

On the one hand, when we look at the causality analyses made for the short term, it is seen that some studies have determined a single or double causality relationship between the current account deficit and economic growth in the short term. However, in some of these analyses, a causal relationship has been determined from the current deficit to economic growth and in some from ←13 | 14→economic growth to the current deficit. On the other hand, in some studies, it is seen that no causality relationship can be determined for the short term.

The main objective of this study is to empirically analyze the theoretical relationship between economic growth and current deficit for 32 OECD countries, including Turkey within the framework of 2005:1–2017:4 period and which can be reached to accurate data. For this purpose, the relationship between economic growth and current deficit for OECD countries will be analysed empirically using time series and panel data analysis.

2 Literature

When the literature is analyzed, it is seen that the relationship between economic growth and the current deficit is tested by using different data, sample, period and method, and many studies have been done in this regard. These studies have reached different application results for different samples and periods.

A summary of applied literature on relevant studies examining the relationship between economic growth and the current account deficit is given in Tab. 1.1.

Tab. 1.1: Summary of Applied Literature



Author/s

Sample/Term

Method

Result

Debelle and Faruqee (1996)

1971–1993/ 21 Developed Countries

Horizontal Section, Time Series and Panel Data Analysis

Economic growth increases the current account deficit.

Bagnai and Manzocchi (1999)

1965–1994/ 49 Developing Countries

Time Series and Panel Data Analysis (LSDV)

Economic growth increases the current account deficit.

Freund (2000)

1980–1997/ 25 Industrialized Countries

Time Series and Panel Data Analysis

Economic growth increases the current account deficit through consumption expenditures.

Calderon, Chong and Loayza (2000)

1966–1995/ 44 Developing Countries

Panel Data Analysis (GMM)

There is an inverse but weak relationship between the current account balance and economic growth.

Kandil and Greene (2002)

1960–2000/ USA

Cointegration Analysis

Increases in GDP increase the current account deficit through the import channel.

Chinn and Prasad (2003)

1971–1995/ 18 Developed, 71 Developing Countries

Panel EKK Analysis

There is a weak relationship between growth and current account balance in both developing countries and developed countries.

Parikh and Stirbu (2004)

1970–1999/ 42 Countries in Total from Asia, Africa and Latin America

Panel Data Analysis

Economic growth increases the current account deficit.

Dominguez (2005)

1980–1990/ Singapore

Smallest Squares (EKK)

Economic growth increases the current account deficit.

Erkılıç (2006)

Turkey/ 1980–2005

EKK and VAR

There is a one-way causality relationship from the rate of economic growth to the current account deficit.

Tunalı (2007)

Turkey/ 1980–2006

Classical Linear Multiple Regression Model and VAR

One of the most important reasons for the current account deficit in the long term is economic growth.

Aristovnik (2007)

1971–2005/ Middle East and North Africa (MENA) Countries

EKK, LSDV, FGLS and GMM

Economic growth increases the current account deficit.

Erbaykal (2007)

Turkey/ 1987–2016

Toda and Yamamoto Causative Analysis

Economic growth is the cause of the current account deficit, and there is a reason for economic growth in the current account deficit.

Telatar and Terzi (2009)

Turkey/ 1991–2005

Granger Causality Test and VAR

There is a one-sided causality from the growth rate to the current account balance.

Morsy (2009)

1970–2006/ 28 Oil Exporting Countries

Panel Data Analysis (GMM)

Economic growth has no effect on the current account deficit.

Yılmaz and Akıncı (2011)

Turkey/ 1980–2010

Granger Causality Test

There is a one-way causality from GDP to the current account balance.

Kostakoğlu and Dibo (2011)

Turkey/ 1991–2010

VAR

Economic growth increases the current account deficit.

Sekmen and Çalışır (2011)

Turkey/ 1998–2009

ARDL

There is a positive relationship between economic growth and current account deficit in the short term; however, there is no relation in the long term.

Bayraktutan and Demirtaş (2011)

1980–2006/ 19 Developing Countries

Panel Data Analysis

Economic growth is increasing the current account deficit.

Hepaktan and Çınar (2012)

1975–2008/ 27 OECD Countries

Panel Cointegration Analysis

There is a cointegration relationship between GDP and the current account balance.

Akçay and Erataş (2012)

1993–2011/BRIC countries

Panel Data Analysis and Dumistrescu-Hurlin Causality Test

In the long term, a causal relationship between economic growth and current transactions has been identified.

Songur and Yaman (2013)

1981–2010/ 10 Developing Countries

Panel Cointegration and Panel VECM

In the long term, a causality relationship was determined from economic growth to current transactions and from current transactions to economic growth.

Yalçınkaya and Temelli (2014)

1992–2013/ BRICS and MINT Countries

Panel Data Analysis

Both short- and long-term economic growth has been determined to be effective in the current account.

Yurdakul and Uçar (2015)

Turkey/ 1991–2014

Granger Causality Test and VAR

There is no correlation between economic growth and the current account deficit.

Şit and Alancıoğlu (2016)

Turkey/ 1980–2014

VAR

There is a two-way causality relationship between GDP and current account balance.

Erdoğan and Acet (2016)

Turkey/ 2003–2015

Granger Causality Test and VAR

There is a two-sided causality relationship between economic growth and current account balance.

Duman (2017)

Turkey/ 2003–2017

VAR

There is a one-sided causality relationship between economic growth and current account balance.

Uçak (2017)

Turkey/ 1980–2015

Granger Causality Test and VAR

There is a one-way causality relationship from real GDP to the current balance.

Ersungur et al. (2017)

Turkey/ 1998–2014

VAR

There is a two-way causality relationship between GDP and current account balance.

İslatince (2017)

Turkey/ 2003–2016

ARDL

The current account deficit has a negative impact on economic growth in both the short and long term.

Source: Edited by authors.

3 Material and Method

In the time series, the most important assumption that is required to obtain meaningful relationships between the variables studied is that the variables must be stable. This assumption is necessary for effective and consistent estimates (Gujarati, 2005). In addition, the long-term relationship between the series is determined by the analysis of cointegration. When Xt and Yt are the first (I (1)) error term (ut) I (0) obtained from the regression model of the two-time series, these two variables are called co-integrated series. Finally, the direction of the relationship between the variables is determined by Granger causality analysis.

Johansen developed the Largest Eigenvalue (lmax) and Trace (ltrace) tests as calculated in Equation 1 based on the maximum likelihood method with the vector autoregressive (VAR) model in estimating the multiple cointegration vector between two or more variables. The r in equality shows the maximum number of cointegration vectors among the variables. ltrace tests the number of cointegrated vectors, and lmax tests the significance of the coherent vectors (Enders, 1995).

Details

Pages
348
Year
2019
ISBN (PDF)
9783631804100
ISBN (ePUB)
9783631804117
ISBN (MOBI)
9783631804124
ISBN (Softcover)
9783631801321
DOI
10.3726/b16226
Language
English
Publication date
2020 (June)
Keywords
Risk Profitability Banking Sector Stock Prices Economy Politics Economic Growth
Published
Berlin, Bern, Bruxelles, New York, Oxford, Warszawa, Wien, 2019. 348 pp., 26 fig. b/w, 108 tables.

Biographical notes

Çağatay Başarir (Volume editor)

Çağatay Başarır works as an academician at Bandirma Onyedi Eylul University, International Trade and Logistics Department. He has studies on financial markets, stock exchange markets, commodity markets and precious metals in the field of time series analyses, multi-criteria decision analysis and performance measurement. He instructs financial management, financial analysis, financial markets, international finance and portfolio management lessons both in graduate and undergraduate degree.

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