The Effect of Hot Money Flow on Pre-Crisis Indicators of Current Accounts and Real Sectors in Turkish Economy

Abstract

We investigate the impact of the hot money movements on current account and real sector leading crisis indicators under VAR (Vector Autoregressive) framework using quarterly data for a long period of 1991-2014. Our findings show that hot money movements have negative impact on current account deficit and foreign trade deficit pre-crisis indicators. We further show that they lead to instability in growth and inflation pre-crisis indicators.