Analysis of the Effects of Foreign Direct Investment on the Financing of Current Account Deficits in Turkey
Ceran Zeynep Zafir, Funda H. Sezgin

Abstract
The high rate of deficit in current accounts in Turkey shows a marked increase compared to the period before 2003. On the other hand, outsourcing in forms of foreign investments and external borrowing in order to finance the current deficits has shown a similar increase. This parallelism makes apparent the effects of capital movement, specifically of foreign direct investments on current accounts. With the aim of proving foreign direct investments different from portfolio investments and external debts in the financing of current account deficits, this study analyzes short-term and long-terms relationships. It identifies foreign direct investments as the primary active variable in the financing of current deficit.

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