Analyzing The Relationship Among The GDP - Current Account Deficit and Short Term Capital Flows: The Case of Emerging Markets

In this study, it was analyzed if there was causal relationship among the current deficit, short term capital flows and economic growth in emerging markets. Before causality test was done, CDLM tests were done in order to the fact that to be able to determine if there was cross section dependence in countries form the panel. At the end of CDLM tests cross section dependence in emerging markets form the panel was determined. Then, panel causality test developed was done. According to the result of panel causality test bidirectional causality between current account deficit and GDP, unidirectional causality from short term capital flows to current deficit and GDP were determined.