Impact of Consumer Loans on Inflation and Current Account Deficit: A Toda Yamamoto Causality Test for Turkey

This study aims to investigatethe causality relationship between consumer loansandinflation,and consumer loans and current account deficitin Turkey. Inthis scope, Toda Yamamoto causality test isused for the periodsbetween 1994:1 and2015:3. According to testresults, we found that there is no causal relationship between consumer loansandinflation rate,andconsumer loans andcurrent account deficit. In other words, changes in consumer loans do not lead neither high current account deficit rates norhigh inflation rates in Turkey. Therefore,limiting consumer loans is not the solution for inflation and current account deficit problems of Turkey and policy makers should apply some other effective policies to solve high CA deficit and high inflation problems.