Abstract:

Mainly applying import substituting industrial policies in the 1960s and 1970s, Turkey initiated a policy of industrialization based on the export of flexible goods after the 1980s, which consequently led to the foreign trade deficits that have lasted even in our day. In this sense, this study aims to examine the foreign trade between Turkey and 10 selected OECD countries on the basis of total merchandise in terms of the indicators of income and price flexibility and to contribute to the empirical literature by presenting the proposals for reducing foreign trade deficits with the results obtained from the study. The results of the real effective exchange rate flexibility coefficient obtained through the ARDL Econometric method show that Turkish foreign trade does not support the Marshall-Lerner condition in any group of goods. Nevertheless, the results we have obtained from the coefficient of domestic income variable show that the effect of income on imports is strong and therefore can affect the policy towards foreign trade deficits.

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