Abstract:

This paper aims to analyze the influence of foreign trade sizes on economic growth. Theoretical framework of this study rests on Harberger-Laursen-Metzler (HLM) and Obstfeld-Razin-Svensson (ORS) effect approaches. Approach of HLM indicates that any setback in foreign trade size of a country causes a favorable effect on foreign trade deficit of that country. In accordance with improved growth rates generated by this positive effect HLM approach also provides information towards an increase of foreign trade deficits. This approach is known as S-Curve in academic literature. ORS approach on the other hand, opposes that improvements in foreign trade sizes become effective on economic growth with perceptions related with continuity of shock happening to foreign trade sizes. With this context, positive and negative effects of foreign trade sizes on economic growth are examined via Markov Variation technique. In the analysis, manufacturing industry production index is taken as indicator of economic growth whereas foreign trade sizes are taken as regimen or transitional parameter. With findings of this study, outward-oriented growth strategy depends on the terms of trade are in favor of the country.

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