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Original scientific paper

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

Mehmet Yazici
M. Qamarul Islam


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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 adopted 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.

Keywords

J-curve; Customs Union; Bounds Testing Approach; Exchange Rate; Trade Balance

Hrčak ID:

77586

URI

https://hrcak.srce.hr/77586

Publication date:

1.9.2011.

Article data in other languages: croatian

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