Abstract:

In this study, empirical relations between purchasing power parity and foreign trade have been analyzed for the period of 1983-2011 by using econometrical model. Based on the analysis; it has been decided that, by examining export, import, volume and balance dependent variables at unit root analyses, they are stagnant. Based on LM test result, it is found that no autocorrelation exist at the serial. According to model results for export, it is found that changes in foreign trade data have no significant effect on changes in purchasing power parity. However, for the import, changes in foreign trade data have significant effect on changes in purchasing power parity. Purchasing power parity has negative effect on import. When SAGP increases 1 point, import decreases 1.05 point. In addition, purchasing power parity’s effects on foreign trade volume and balance of foreign trade are negative. Granger Causality Test has been utilized to see if there is any causality among variables and since the variables’ p value is larger than 0.05, non-absence hypothesis which states “Variables are not Granger reason of each other” has been accepted. There is no causalrelationamongvariables.

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