IMPACT OF EXCHANGE RATE AND CUSTOMS UNION ON TRADE BALANCE AT COMMODITY LEVEL OF TURKEY WITH EU (15)


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Yazici M., Islam M. Q.

ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA, vol.24, no.3, pp.75-85, 2011 (Journal Indexed in SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 24 Issue: 3
  • Publication Date: 2011
  • Doi Number: 10.1080/1331677x.2011.11517468
  • Title of Journal : ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA
  • Page Numbers: pp.75-85
  • Keywords: J-curve, Customs Union, Bounds Testing Approach, Exchange Rate, Trade Balance, J-CURVE, DYNAMICS

Abstract

This paper investigates the short-run and long-run impact of exchange rate and customs union on the trade balance at commodity-group level of Turkey with EU (15). Bounds testing approach is employed where a new strategy in the model selection phase is odopted ensuring that optimal model is selected from those models satisfying both diagnostics and cointegration. Results indicate that in the short-run exchange rate matters in determination of trade balance of 13 commodity groups out of 21 and customs union in 8 cases. Pattern of response of trade balance to exchange rate does not suggest a J-curve effect in any of cases. As for the long-run effect, neither exchange rate nor customs union has a statistically significant effect on trade balance of any of commodity groups, suggesting that those significant short-run effects don't last into long-run.