RELATIONSHIP BETWEEN CURRENT ACCOUNT DEFICIT AND ECONOMIC GROWTH IN OECD COUNTRIES: 1980-2014

Economic growth can be defined as an increase in production capacity between periods. Thus, current account balance emerges as a very important element of national income expansion. In this sense, it can be concluded that there is a significant relationship between current account balance and economic growth. In this study, the relationship between the economic growth and current account balance are analyzed by using the Panel Data Analysis for the time period of 1980- 2014 in OECD countries. In the first stage of analysis, variables of current account deficit and economic growth are tested in order to see whether the unit was rooted. Since all the variables are first degree stationary, a co-integration test is performed to examine the long-run relationship between variables. As a result, there has been found long-term relationship between current account deficit and economic growth. In this context, as a result of VECM Granger Causality Test bi-directional causality is determined for both short- run and long- run periods.