IMPORT DEPENDENCY OF EXPORTS AS A CAUSE OF CURRENT ACCOUNT DEFICIT

the increase in IDE may be the main cause of current account imbalances. This argument is important because historical evidence suggests that large and persistent current account imbalances often lead to subsequent corrective crisis. If the increase in IDE is a major cause of current account imbalances, reducing it becomes an important policy option to prevent further crisis. While there is a large literature

-cannot solely be explained by the increase in IDE.
rates.This is mainly because a devaluation, on the one hand, directly increases the minimal if they exist at all.Also, a devaluation would not always reduce imports, since increase in import dependency of production and exports led to a deterioration of the trade and the current account balance.
tial R 2 2 is only 0.062). - are lower than 0.200.In this period, therefore, there is very little support for the view that Finally, the relationship between the variables can also be examined by cross-country

Conclusions
theoretical basis and empirical support.Our analyses have shown that the relationship between these two variables is conjunctural and therefore temporary.This is because the increase in both variables in the 2000s resulted from different sources.The increase imbalances, however, are conjunctural and temporary problems by their nature.The is weak, there may be a weak theoretical case for a causality from current account preciation of local currencies which make imported inputs cheaper which may cause Figure 1.
imbalances (% of GDP) and import dependency of exports (%) a selection of 62 countries and for the period of 1995 to 2011, which are both determined by the availability of data.account imbalances have been due to various temporary conjunctural factors.Secondly, run from current account imbalances to IDE.The paper, therefore, concludes that the Import dependency of exports and current account imbalances and current account surpluses.

5 6
and therefore the relationship between these two variables may have been coincidental determined by conjunctural factors.For example, while the increase 4 .The increase instability but they are nevertheless temporary in their nature.It is then possible to ara coincidental relationship due to cyclical factors in the 2000s.overvaluation of the Turkish Lira, cheapened imports and increased the import dependency of both exports and domestic production.None of the above-mentioned articles tested the causality between these two variables.itwould not necessarily cause current account imbalances.Empirical testscurrent account surplus countries would experience low IDE.Simple observations fail -5 early 2000s and after the 2008 crisis, the increase in IDE continued in all three country and surplus countries in the 2000-2008 period, when the current account imbalances structural break.The partial R 2 values 6 in the table indicate the power of the correlation relationship.The use of partial R 2 values is essential to assess the direct link between the variables since a trend is added into the correlations to remove the impact of conjectural factors.

Figure
Figure 3. T Figure 4. S

he average current account and import dependency of exports by current account c -current account surplus countries period
, which indicate the conjunctural nature of the relationship.Naturally, the correlaincrease in their IDE and current account surpluses.The correlations are positive and weaker for the current account balance countries in both periods.