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The Determining Role of EU in Turkey's Trade Flows: A Gravity Model Approach

Author

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  • Ozgul Bilici

    (Department of Economics, Izmir University of Economics)

  • Erkan Erdil

    (Department of Economics, Middle East Technical University)

  • I. Hakan Yetkiner

    (Department of Economics, Izmir University of Economics)

Abstract

This paper aims to determine the role of EU in Turkey’s trade flows by using the gravity model. It also aims to test whether the Customs Union (of EU) that Turkey entered in 1996 made a deviation in Turkey’s trade flows. Regional trade agreements on the one hand create new trade opportunities (trade creation effect). On the other hand, these agreements may also lead to diversion from free trade (trade diversion effect). Turkey’s Customs Union agreement without becoming a member of EU provides a laboratory to researchers to test whether the agreement was significant enough to cause any deviation in Turkey’s trade flow. In the first part of the study, we shortly provide some descriptive statistics related to Turkey’s trade flows with EU to see whether EU has gained any weight in the flows. In the second part, we first develop a gravity model that econometrically designates the determinants of Turkey’s trade flows via panel data approach. Next, we use this equation to test the importance of EU countries in Turkey’s trade flow and whether the flow has been subject to a deviation after the Customs Union agreement. Our findings indicate that EU countries have always been important in Turkey’s trade flow and that Customs Union has increased EU’s importance marginally in determining Turkey’s trade flow.

Suggested Citation

  • Ozgul Bilici & Erkan Erdil & I. Hakan Yetkiner, 2008. "The Determining Role of EU in Turkey's Trade Flows: A Gravity Model Approach," Working Papers 0806, Izmir University of Economics.
    • Handle: RePEc:izm:wpaper:0806
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    References listed on IDEAS

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    Cited by:

    1. Christopher S. P. Magee, 2016. "Trade creation, trade diversion, and the general equilibrium effects of regional trade agreements: a study of the European Community–Turkey customs union," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(2), pages 383-399, May.
    2. Hüseyin Aytuğ & Merve Mavuş Kütük & Arif Oduncu & Sübidey Togan, 2017. "Twenty Years of the EU-Turkey Customs Union: A Synthetic Control Method Analysis," Journal of Common Market Studies, Wiley Blackwell, vol. 55(3), pages 419-431, May.
    3. Erkan Erdil & Y?lmaz Akdi, 2019. "Customs Union Effect in International Trade: Turkish Case," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 7(2), pages 43-58, November.
    4. Türkcan, Kemal, 2014. "Investigating the Role of Extensive Margin, Intensive Margin, Price and Quantity Components on Turkey’s Export Growth during 1998-2011," MPRA Paper 53292, University Library of Munich, Germany.
    5. Dursun, Gökhan, 2023. "The impact of the customs union on the EU – Turkey trade," International Economics, Elsevier, vol. 173(C), pages 143-163.
    6. Zumrut Imamoglu & Baris Soybilgen, 2012. "The Role of Economic Size and Distance in Turkey's Exports," Research Briefs 135, Bahcesehir University, Betam.
    7. Miran, Bülent & Atiş, Ela & Bektaȿ, Zerrin & Salalı, Ece & Cankurt, Murat, 2013. "An Analysis of International Raisin Trade: A Gravity Model Approach," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152200, Australian Agricultural and Resource Economics Society.

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    More about this item

    Keywords

    Gravity model; Turkey; EU; Panel Data; Customs Union;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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