In Turkey, the Central Bank started to apply a new monetary policy as a result of the sudden increase in credit volume due to 2008 global crisis. The purpose of this policy was to limit the credit expansion. Because it was accepted that the rise in credit volume was effective in widening the current deficit by increasing the domestic consumption which is, in turn, dependent upon imports. The purpose of this study is to determine whether the rise of total domestic credits volume is effective in

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... he increase of current account deficit. In the study, the dynamic relationship between the ratio of current account deficit to the GDP and the ratio of total credits to the GDP was studied by utilizing Granger causality tests, action-reaction technical analysis and variance analysis within the framework of Vector Error Correction Model. For this purpose, stationarity tests and structural break unit root tests (since there are structural breaks in Current Account Deficit/GDP Series) were carried out primarily for the variables used in the analysis. Since Total Credits/GDP ratio is not stationary, traditional unit root tests of ADF, PP and KSSS were utilized. The results of Granger causality test indicate that total credit/GDP ratio affects the Current Account Deficit/GDP ratio in the short run and as well as in the long run.