Journal of Applied Finance & Banking

The Association between Current Account Deficit and House Prices in Turkey

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  • Abstract

    Current account deficit has been a popular research topic among Turkish economists. The study investigates the relation between current account deficit of Turkey and house prices in the country. This paper uses the classical linear regression model and this is run for three times. The results of the model indicate that current account deficit is positively associated with house price changes in Turkey. Another result is that, GDP per capita growth is not significantly associated with house price changes. Not surprisingly, inflation is also positively associated to house prices. The important outcome of the study is that Turkey might experience similar housing market problems in Spain and US as a consequence of Turkey’s effort to decrease its current account deficit. Therefore, the study is expected to attract policy maker’s attention and start a discussion on how to maintain the current condition of housing market while decreasing the current account deficit. Even though there have been many research on the relation between macroeconomic indicators and house prices, to our knowledge this is the first research on the impact of current account deficit on house prices.