Effect of Exchange Rate Changes on Export Performance in Turkey

Abstract

In this study we examined the relationship between exchange rate changes and export performance in Turkey. The study uses time series data from mid 1980s, the years Turkey started to use flexible exchange rate and export-based growth, and ends at 2009, the year Turkish export reach a significant place in the world’s exports. In empirical analysis, the study uses bound testing and autoregressive distributed lag (ARDL) approach to model the dynamic relationship between the exports and its determinants. The short-run and long-run causality among the variables in the model is determined based on the estimated ARDL models. The empirical results show that the real effective exchange rate coefficient is insignificant. Therefore depreciation of real exchange rate in Turkey does not cause a substantial increase in export volume in longrun. We find that the recent export boom in Turkey is determined by wages, productivity and world demand, rather than exchange rate changes