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Real Exchange Rate Effects On The Turkish Trade Balance

Author

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  • Fela Özbey

    (Çukurova University)

Abstract

A large number of studies have examined the relationship between the trade balance and the exchange rate, focusing on whether depreciations improve the trade balance in the long run and whether this effect is different in the short run. In general, it is argued that the short run effect of currency depreciation is to worsen the trade balance, but this is reversed in the long run; thus, producing the J-curve shape. The aim of this study is to investigate the short run and long run effects of the real effective exchange rate on the trade balance of Turkey and to infer whether Marshall-Lerner condition and J-curve effect exist. To do that, monthly data covering the period 2003:M1-2017:M3 is used. The relationship between variables is estimated using autoregressive distributed lag (ARDL) model, and Bounds test is applied to examine the existence of a long run relationship. Overall results are in favor of a long run relationship and suggest that Marshall-Lerner condition is satisfied. No evidence is found supporting J-curve effect.

Suggested Citation

  • Fela Özbey, 2018. "Real Exchange Rate Effects On The Turkish Trade Balance," Proceedings of International Academic Conferences 7508666, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iacpro:7508666
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    File URL: https://iises.net/proceedings/iises-annual-conference-sevilla/table-of-content/detail?cid=75&iid=035&rid=8666
    File Function: First version, 2018
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    More about this item

    Keywords

    ARDL Model; J-Curve Effect; Marshall-Lerner Condition; Real Effective Exchange Rate; Trade Balance;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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