Abstract:

Foreign trade is one of the most important strategic tools for country economies. In the 21st century, the increasing international movement of goods plays a significant role in the economic classification of countries. In this study, the relationship between real effective exchange rate, real exports, and real imports in the Turkish economy has been analyzed using monthly data for the periods of January 2013 and February 2023. The main objective of this analysis is to measure Turkey's external trade performance and gain insight into its passivity. Augmented Dickey-Fuller (1981) and Phillips and Perron (1988) unit root tests have been applied to examine the stationarity of the variables. Then, to explore the detailed relationship between the positive and negative components of the variables, the Hatemi j-Roca (2014) asymmetric causality test has been conducted. Finally, the Balcılar et al. (2010) bootstrap rolling window causality test, which allows the detection of periodic interactions, has been utilized. According to the analysis, a significant causality has been detected from the positive component of the real effective exchange rate to the positive component of real exports, both asymptotically at the 5% level and bootstrap method at both 5% and 10% significance levels. The presence of the asymmetric relationship, which is confirmed periodically by external models, is further supported by the broader time span of causality relationships detected between the real effective exchange rate and real exports, and between real imports and real effective exchange rate using the Balcılar et al. (2010) bootstrap rolling window causality analysis. In light of these results, fluctuations in exchange rates are expected to be a dynamic source of stress for Turkey's economy concerning foreign trade.

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