IDEAS home Printed from https://ideas.repec.org/a/vls/finstu/v24y2020i1p53-69.html
   My bibliography  Save this article

Testing J-Curve Effect On Trade Balance In Turkish Economy

Author

Listed:
  • KANSEL,Zubeyir Can

    (Graduate School of Social Science, Anadolu University, Turkey.)

  • BARI,Bilgin

    (Department of Economics, Anadolu University, Turkey.)

Abstract

This study researches the effects of changes in the exchange rate on the trade balance after the transition to the floating exchange rate in the Turkish economy. For this purpose, ARDL and ECM models have been developed by using quarterly data from 2003 through 2018. The starting point of the research is to examine the validity of the JCurve theory in the Turkish economy. According to the results of the analysis of the main model used in the study, there is no J-Curve effect on the trade balance in the related period. The results state that the effect of changes in exchange rates on the foreign trade balance is limited. The main reason for that is the high usage of imported intermediate goods and inputs in production. The results of analysis show that the fundamental structural problem of Turkey's economy is the usage of imported intermediate goods and inputs. Therefore, the effect of the exchange rate on trade balance differs from theoretical expectations. The main policy result of the study is that foreign trade balance might be improved by increasing the usage of domestic intermediate goods and inputs in production.

Suggested Citation

  • KANSEL,Zubeyir Can & BARI,Bilgin, 2020. "Testing J-Curve Effect On Trade Balance In Turkish Economy," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 24(1), pages 53-69, March.
    • Handle: RePEc:vls:finstu:v:24:y:2020:i:1:p:53-69
    as

    Download full text from publisher

    File URL: http://www.icfm.ro/RePEc/vls/vls_pdf/vol24i1p53-69.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Salah A. Nusair, 2017. "The J-Curve phenomenon in European transition economies: A nonlinear ARDL approach," International Review of Applied Economics, Taylor & Francis Journals, vol. 31(1), pages 1-27, January.
    2. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    3. Paresh Narayan & Russell Smyth, 2005. "Trade Liberalization and Economic Growth in Fiji. An Empirical Assessment Using the ARDL Approach," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 10(1), pages 96-115.
    4. Mohsen Bahmani-Oskooee & Hanafiah Harvey & Scott W. Hegerty, 2015. "The Effects of Exchange Rate Volatility on U.S.-Chilean Industry Trade Flows," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot GmbH, Berlin, vol. 61(4), pages 353-371.
    5. Mohsen Bahmani-Oskooee & Hanafiah Harvey, 2015. "Impact of Exchange Rate Volatility and Commodity Trade between U.S. and Singapore," Review of Economics & Finance, Better Advances Press, Canada, vol. 5, pages 22-40, February.
    6. Esin OKAY & Rana ATABAY BAYTAR & Ercan SARIDOĞAN, 2012. "The effects of the exchange rate changes on the current account balance in the Turkish economy," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 27(310), pages 79-101.
    7. Mohsen Bahmani-Oskooee & Scott Hegerty & Amr Hosny, 2015. "The effects of exchange-rate volatility on industry trade between the US and Egypt," Economic Change and Restructuring, Springer, vol. 48(2), pages 93-117, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mohsen Bahmani-Oskooee & Ferda Halicioglu & Amirhossein Mohammadian, 2018. "On the asymmetric effects of exchange rate changes on domestic production in Turkey," Economic Change and Restructuring, Springer, vol. 51(2), pages 97-112, May.
    2. Mohsen Bahmani-Oskooee & Javed Iqbal & Saqib Ullah Khan, 2017. "Impact of exchange rate volatility on the commodity trade between Pakistan and the US," Economic Change and Restructuring, Springer, vol. 50(2), pages 161-187, May.
    3. Andrew Phiri, 2020. "Structural changes in exchange rate-stock returns dynamics in South Africa: examining the role of crisis and new trading platform," Economic Change and Restructuring, Springer, vol. 53(1), pages 171-193, February.
    4. Mohsen Bahmani-Oskooee and Hanafiah Harvey, 2018. "The U.S. Trade Balance with Partners from Developing World: An Asymmetry Analysis of the J-Curve Effect," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 43(2), pages 29-44, June.
    5. Ekundayo P. Mesagan & Isaac A. Ogbuji & Yasiru O. Alimi & Anthonia T. Odeleye, 2019. "Growth Effects of Financial Market Instruments: The Ghanaian Experience," Working Papers 19/095, European Xtramile Centre of African Studies (EXCAS).
    6. Onatunji Olufemi, 2019. "Do real exchange rate changes have symmetric or asymmetric effects on trade balance in Nigeria? Evidence from Non-linear ARDL Model," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 11(1), pages 14-23, June.
    7. Mohsen Bahmani-Oskooee & Ahmed Usman & Sana Ullah, 2023. "Asymmetric Impact of Exchange Rate Volatility on Commodity Trade Between Pakistan and China," Global Business Review, International Management Institute, vol. 24(3), pages 510-534, June.
    8. Ivan D. Trofimov, 2023. "The J-Curve Effect in Services Trade: A Disaggregated Analysis," Foreign Trade Review, , vol. 58(2), pages 199-219, May.
    9. Mohsen Bahmani‐Oskooee & Mehrnoosh Hasanzade, 2022. "Policy uncertainty and income distribution: Asymmetric evidence from state‐level data in the United States," Bulletin of Economic Research, Wiley Blackwell, vol. 74(1), pages 179-220, January.
    10. Mohsen Bahmani-Oskooee & Sujata Saha, 2020. "Exchange rate risk and commodity trade between U.S. and India: an asymmetry analysis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 25(4), pages 675-695, October.
    11. Seema Narayan & Paresh Kumar Narayan, 2010. "Estimating Import And Export Demand Elasticities For Mauritius And South Africa," Australian Economic Papers, Wiley Blackwell, vol. 49(3), pages 241-252, September.
    12. Andrew C. Worthington & Helen Higgs, 2011. "Macro drivers of Australian housing affordability, 1985â 2010: An autoregressive distributed lag approach," Discussion Papers in Finance finance:201116, Griffith University, Department of Accounting, Finance and Economics.
    13. Mohsen Bahmani-Oskooee & Ridha Nouira, 2020. "On the impact of exchange rate volatility on Tunisia’s trade with 16 partners: an asymmetry analysis," Economic Change and Restructuring, Springer, vol. 53(3), pages 357-378, August.
    14. Mohsen Bahmani-Oskooee & Hanafiah Harvey, 2018. "Do inpayments and outpayments respond to exchange rate changes asymmetrically: Evidence from Malaysia," The International Trade Journal, Taylor & Francis Journals, vol. 32(4), pages 317-342, August.
    15. Eita, Joel Hinaunye & Pedro, Marcio Jose, 2020. "Modelling total factor productivity in a developing economy: evidence from Angola," MPRA Paper 101304, University Library of Munich, Germany, revised 30 Apr 2020.
    16. Shankaran Nambiar & Arunnan Balasubramaniam, 2016. "Does ASEAN–India Trade Stimulate Income? A Cointegration Analysis Using the ARDL Approach," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(2), pages 295-314, September.
    17. Mohsen Bahmani-Oskooee & Ahmed Usman & Sana Ullah, 2020. "Asymmetric J-curve in the commodity trade between Pakistan and United States: evidence from 41 industries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(2), pages 163-188, June.
    18. Enisan, Akinlo A. & Olufisayo, Akinlo O., 2009. "Stock market development and economic growth: Evidence from seven sub-Sahara African countries," Journal of Economics and Business, Elsevier, vol. 61(2), pages 162-171.
    19. Hakizimana Phanuel, 2024. "Exchange Rate Volatility and Decision-Making in Rwanda’s Logistics Sector: A Case Study of Gorilla Logistics Limited," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(9), pages 2457-2463, September.
    20. Mohsen Bahmani-Oskooee & Augustine C. Arize, 2020. "Asymmetric response of domestic production to exchange rate changes: evidence from Africa," Economic Change and Restructuring, Springer, vol. 53(1), pages 1-24, February.

    More about this item

    Keywords

    Trade Flows; Real Effective Exchange Rate; ARDL model; Cointegration;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vls:finstu:v:24:y:2020:i:1:p:53-69. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniel Mateescu (email available below). General contact details of provider: https://edirc.repec.org/data/cfiarro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.