Since the liberalization of the financial markets in 1989, globalization and capital flows have been discussed widespread in Turkey but not as much as the period starting from 2008 to 2014 that Federal Reserve implemented one of the most expansionary monetary policies throughout the history. One of the most significant problems that affect production and investment for developing countries such as Turkey is the insufficiency of the financial funds and capital. Therefore, foreign direct investments are more favorable then the short-term capital flows. However, portfolio outflows have significant effects on the emerging markets especially for the ones that could not achieve the stability in financial markets. Financial crises in Turkey after 1989 can be listed as the perfect examples of this phenomenon. Countries that run high current account deficits are exposed to the risk of the loss of human capital, deterioration in credit channel which negatively affects production when the capital outflow takes place and finally this cycle ends up with a severe economic crisis (Calvo, 1998:40-42; Alper and Sağlam, 2001; BlaszkiewiczSchwartzman and Öz, 2012; Çulha, 2006). Financial crises in 1994 and 2001 in Turkey, 1997 crisis in Asia, 1998 crisis in Russia are some of the examples of how destructive can capital outflows be on domestic economies (Calvo, Leiderman and Reinhart, 1996; Hoggarth and Sterne, 1997; Lopez-Mejia, 1999; Fernandez-Arias and Montiel, 1996; Alper and Saglam, 2001). Thus, factors that cause portfolio inflows and outflows should be investigated to minimize the possible contradictory effects of short-term capital flows on domestic economies. Factors affecting the short-term capital flows, in other words portfolio flows, need to be investigated from a financial point of view. Arbitragers’ main aim is to get the highest profit from the investment opportunities that have similar risk levels. Thus, availability of the investors and funds is the demand side of this equation while the supply side consists of local authorities, governments or anyone else who needs those financial funds. Literature about capital flows also have a similar type of differentiation while grouping the factors that influence capital flows. In some articles, factors are grouped as external and domestic (Hoggarth and Sterne, 1997; Hernandez, Mellado and Valdes, 2001; Lopez-Mejia, 1999) while in other articles, those factors are listed as push instead of external and pull instead of internal factors (Arbatli, 2011; Dasgupta and Ratha, 2000; Hernandez, Mellado and Valdes, 2001; Fernandez-Arias, 1996; Chuhan, Claessens and Mamingi, 1993; Fratzscher, 2011). Likewise, articles can also be classified under two groups in terms of the dominant factors on capital flows. According to some studies, external factors are dominant on portfolio flows (Calvo, Leiderman and Reinhart, 1996; Fernandez-Arias, 1996; Lopez-Mejia, 1999; Korap, 2010) while others claim that domestic factors are more dominant than external factors (Schadler et. al., 1993; Dasgupta and Ratha, 2000; Çulha, 2006; Hernandez et. al. 2001; Mody et. al., 2001). However, uncovered interest differentials were regarded as one of the main causes of the portfolio flows to Turkey in many studies (Celasun et.al. 1999:11-12; Agénor et. al. 1997:14). Turkey kept budget deficit under control with the help of privatization of the unprofitable state-owned enterprises while applying tight fiscal policies in addition to switching to floating exchange rate regime after 2001 crisis. In 2005-2014 period, global factors were also supportive due to the expansionary monetary policies of Federal Reserve to support the mortgage sector and keep interest rates relatively stable which in return led to one of biggest financial crises of the history and continuation of monetary expansion to a greater extent. Thus, dominance of the external factors on domestic factors is relatively small in this specific period. Data sources of this paper are listed as Central Bank of Turkey-CBRT, Bloomberg Terminal Platform and Federal Reserve Economic Data-FRED. Uncovered interest parity model is the main focus of this paper and according to the results of the VAR analysis, dominant factor is unsurprisingly CDS premiums which is the most important economic variable for the risk-free profit seeking arbitragers. Following the country risk level, exchange rate level appears to be more dominant on portfolio flows rather than the interest rate level. Reasons behind the fact that exchange rate level is more influential on capital flows than interest rate level can be listed as; consecutive current account deficits and therefore decreasing saving rates. Decreasing saving rates and consecutive current account deficits doubtlessly decrease the amount of foreign currency in domestic economy especially on payment dates and increase the dependency on portfolio flows for the developing countries to achieve the funds needed for high growth rates. Moreover, decrease in domestic demand and tight fiscal policies of public authority after 2001 crisis caused the inflation rates and therefore interest rates to decrease on the one hand. On the other hand, decline in interest rates with the help of the increased global liquidity led to high GDP growth rates and more importantly rebound of the domestic demand to a greater extent.