Effects of The Changes in Banking Sector Domestic Credit Volume on Current Account Deficit: An Econometric Analysis in The Scope of Macro Prudential Measures

In this study, the interaction between current account deficit and expansion of domestic credit volume in banking sector is investigated for Turkey by time series analysis with structural break methods for the period of 1992:Q1 - 2017:Q4. Stationarity of the series is tested by Vogelsang and Perron (1998) unit root test and the series are found to be stationary at different levels. Cointegration relationships between the series are examined by Bounds Testing and the series are found to be cointegrated. Structural break dates in the cointegration equation are determined by Bai and Perron (2003) method. Long and short-term analyzes are carried out using ARDL method and it is determined that 1% increase in domestic credit volume in banking sector inclines the ratio of current account deficit to national income by 0.02% in the long term. Moreover, it is seen that 1% increase in industrial production index ascends current account deficit by 1.02 % in the long term. Error correction mechanism of the model operates