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Propagation of Foreign Trade Shocks through Domestic Supply Chain Networks: Evidence from Turkish Firms

Author

Listed:
  • Ahmet Duhan Yassa
  • Kamil Yýlmaz

Abstract

This study investigates the propagation of foreign trade-related shocks through domestic supply chain networks. By combining firm-level customs data with domestic firm-to-firm transaction data, we demonstrate that importer and exporter firms occupy a central position within Türkiye’s domestic supply chain network. These firms interact with numerous other firms and account for a significant share of total domestic trade, facilitating the transmission of external shocks through the supply chain. Our empirical analysis reveals that Turkish firms’ indirect exposure to exchange rate fluctuations, imported input price changes, and foreign demand shocks—via their suppliers or customers—is at least as significant as their direct exposure in explaining variations in gross profitability. Given the close relationship between gross profitability and value added, our results suggest that foreign trade-related shocks can significantly impact gross domestic product (GDP), both directly and indirectly.

Suggested Citation

  • Ahmet Duhan Yassa & Kamil Yýlmaz, 2025. "Propagation of Foreign Trade Shocks through Domestic Supply Chain Networks: Evidence from Turkish Firms," Working Papers 2503, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:2503
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2025/25-03
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    More about this item

    Keywords

    Production network; Supply chains; Foreign trade; GDP volatility; Centrality;
    All these keywords.

    JEL classification:

    • B17 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - International Trade and Finance
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L61 - Industrial Organization - - Industry Studies: Manufacturing - - - Metals and Metal Products; Cement; Glass; Ceramics

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