Academia.eduAcademia.edu

Outline

Title
Abstract
Introduction
Literature Review
Empirical Analysis
CONCLUSION
References

Testing J-Curve Effect on Trade Balance in Turkish Economy

Profile image of Zubeyir KanselZubeyir Kansel

Abstract

This study researches the effects of changes in the exchange rate on the trade balance after the transition to the floating exchange rate in the Turkish economy. For this purpose, ARDL and ECM models have been developed by using quarterly data from 2003 through 2018. The starting point of the research is to examine the validity of the JCurve theory in the Turkish economy. According to the results of the analysis of the main model used in the study, there is no J-Curve effect on the trade balance in the related period. The results state that the effect of changes in exchange rates on the foreign trade balance is limited. The main reason for that is the high usage of imported intermediate goods and inputs in production. The results of analysis show that the fundamental structural problem of Turkey's economy is the usage of imported intermediate goods and inputs. Therefore, the effect of the exchange rate on trade balance differs from theoretical expectations. The main policy resul...

Related papers

The bilateral J-curve: Turkey versus her 13 trading partners
Ferda Halicioglu

Journal of Asian Economics, 2008

This study empirically analyses bilateral J-curve dynamics of Turkey with her thirteen trading partners using quarterly time series data over the period . Previous studies on the J-curve of Turkey are based on only aggregate data and they reveal mixed results. Short and long-run impacts of the depreciation of Turkish lira on the trade balance between Turkey and her thirteen trading partners are estimated from the bound testing approach and error correction modeling. The empirical results indicate that whilst there is no J-curve effect in the short-run, but in the long-run, the real depreciation of the Turkish lira has positive impact on Turkey's trade balance in couple of countries. The stability of the long-run trade balance equations is also checked through CUSUM and CUSUMSQ stability tests.

View PDFchevron_right
An empirical model for the Turkish trade balance: new evidence from ARDL bounds testing analyses
LEVENT KORAP

2011

View PDFchevron_right
The J-Curve Hypothesis: An Analysis for Turkey
Turgay Ceyhan

2021

J-curve which explains the possible effects of exchange rates on foreign trade states that the depreciation of national currency worsens the trade balance in the short-term and has an improvement effect in the long-term. The success of devaluation in affecting the trade balance positively depends on the fulfillment of Marshall-Lerner condition. Accordingly, when the sum of foreign demand elasticity of exported goods and domestic demand elasticity of imported goods is equal to or greater than one, the rise in the RER increases the countryˈs foreign exchange earnings and improves the trade balance. In our study, it is investigated whether the J-curve hypothesis is valid or not in Turkey. For this purpose, the Toda-Yamamoto Causality Test and Hatemi-J (2012) Asymmetric Causality Test are applied using the 1996-2019 monthly data. The Toda-Yamamoto Causality Test results indicate that there is a unidirectional causality relationship from the real exchange rate to import. On the other han...

View PDFchevron_right
Linear and Nonlinear Dynamics of the Turkish Trade Balance
Hüseyin Karamelikli

This study empirically analyses bilateral trade of Turkey with her main trade partners using monthly time series data over the period of 2000 to 2015. J-curve theory and short-run dynamics of bilateral trade is tested by linear ARDL and Non-linear ARDL approaches. The empirical results indicate that there is no J-curve effect during short-run for United States and for France; it symmetrically exists to Germany and asymmetrically to United Kingdom. Also long-run relationship between exchange rate and trade balance has mixed results. Asymmetric long-run relationship between exchange rate and trade balance for United States exists where it is symmetrically most appropriate for Germany. In the other hand this study failed to verify any long-run relationship between exchange rate and trade balance for France and for United Kingdom.

View PDFchevron_right
The effects of real exchange rates and income on the trade balance: A second generation panel data analysis for transition economies and Turkey
Sevgi Sezer, Sevgi Sezer

In this study, effects of real exchange rate, domestic and foreign income on the external trade balance has been analysed in the framework of the extended Marshall-Lerner condition and J-curve phenomenon using 1995:Q1-2015:Q4 period data for fourteen transition economy and Turkey by means of panel cointegration analysis with multiple structural breaks under cross-sectional dependency. Cross-sectional dependence has been analysed with the bias-adjusted cross-section dependence Lagrange multiplier developed by Pesaran et al. (2008) and cross-section dependency has been observed among the countries. Stationary of the series has been tested with the panel unit root test with multiple structural breaks developed by Carrion-i-Silvestre et al. (2005) and it has been found that series are non-stationary in level. The existence of a cointegration relationship between series has been tested with the panel cointegration test with multiple structural breaks developed by Basher and Westerlund (2009) and a cointegration relationship has been observed between the series. Cointegration coefficients have been estimated with the Pesaran (2006) Common Correlated Effects method. According to the analysis result we found evidence that support the extended Marshall-Lerner condition in Belarus, Turkey. Furthermore, the J-curve phenomenon is valid in Belarus, Romania and Slovenia.

View PDFchevron_right
Trade Balance and Exchange Rate: The J-Curve
Ioannis N Kallianiotis

2022

The objective of this paper is to test empirically the effect of a devaluation of a currency on the trade account of the country, the J-curve effect, by using the trade between the U.S. and six countries (Euro-zone, Canada, United Kingdom, Switzerland, Japan, and Australia). A devaluation (depreciation) of the U.S. dollar is increasing the spot exchange rate ($/FC) and increases the price of imports and reduces the price of exports. Then, imports are falling and exports are increasing and the trade account is improved in the long-run. In the short-run, the trade account is deteriorated because imports are prearranged and continue to increase with the higher spot rate. This J-curve hypothesis is tested by using a regression and a VAR model, where the volatility of the real exchange rate (TOT) is specified with a GARCH-M process. The empirical results mostly are supporting the J-curve effect.

View PDFchevron_right
THE RELATION BETWEEN REAL EXCHANGE RATE IN TURKEY AND FOREIGN TRADE: AN APPLIED ANALYSIS
Hatice Nur Germir

In this study, the purpose is to analyze the relation between real exchange rate, export and import by using time series method with data belonging to Turkish economy for the period 2003:01-2013:04. According to the findings, the variables of import and exchange rate have been found significant in the model in which the export variable is the dependent variable. The import level is affected from the variables of export and exchange rate. In the model in which exchange rate is the dependent variable, only the export variable was found to be significant. The course of export has such an effect to increase exchange rate. Moreover, according to the results of Granger causality test, the variables of export and import are the causes of exchange rate, and the import is the Granger cause of export.

View PDFchevron_right
Impact of The Real Effective Exchange Rate on Turkey's Bilateral Trade With 27 European Union Countries: FADL Cointegration
Yılmaz Toktaş

DergiPark (Istanbul University), 2021

Bu makale, en az iki hakem tarafından incelenmiş ve intihal içermediği teyit edilmiştir. / This article has been reviewed by at least two referees and confirmed to include no plagiarism.

View PDFchevron_right
Validity of J-Curve for Turkey and Its Main External Trade Partners: An Application of a Panel Data Approach
Ceren Bostanci

Sosyoekonomi, 2021

External trade cannot create the expected result for some countries due to their economic structures or policies. Economies could encounter severe foreign trade deficits and the risk of an economic crisis. Thus, researchers and policymakers analyse the dynamics of countries' external trade balances. Turkey's persistent current account deficit is one of the most significant macroeconomic problems. Turkey depreciated the Turkish Lira against foreign currencies to reduce its foreign trade deficit in the past. Using panel data analysis, the current study tests the J-curve for Turkey and its six main foreign trade partner countries-Russia, USA, Germany, UK, Italy, and China. Results do not support the validity of the J-curve hypothesis in the long run. Test results analysing the short-run indicate that the whole panel is statistically insignificant.

View PDFchevron_right
Exchange Rates and Turkish Fresh Fruits and Vegetables Trade with the EU Countries: Bilateral Trade Data Analysis Saban Nazlioglu & Ekrem Erdem
Ekrem Erdem

This study examines the role of exchange rate on Turkey’s fresh fruits and vegetables bilateral trade balance with 14 trading partners in the European Union. Because dynamic effects of exchange rate changes on trade balances have been hypothesized as the J-curve effect, special attention is paid to investigate whether or not the J-curve hypothesis is observable. To this end, we apply the bounds testing cointegration approach to the trade balance model for the period of 1995:q1–2007:q2. Results support evidence of the J-curve effect in 2 cases in the short run. In the long run, the exchange rate has a positive impact on the trade balance in 7 out of 14 cases.

View PDFchevron_right

References (12)

  1. Ari, A., & Cergibozan, C. (2017). Determinants of the Trade Balance in the Turkish Economy. The Economies of Balkan and Eastern Europe Countries in the Changed World (pp. 160-169). Kayseri: Knowledge E.
  2. Bahmani-Oskooee, M., Hegerty, S. W., & Hosny, A. S. (2015). The effects of exchange-rate volatility on industry trade between the US and Egypt. Econ Change Restruct, 48, pp. 93-117.
  3. Bal, H., & Demiral, M. (2012). Real Exchange Rate and Trade Balance: The Case of Turkey's Trade with Germany (2002.01- 2012.09). Çukurova Üniversitesi İİBF Dergisi , 16 (2), 45-64.
  4. Cambazoğlu, B., & Karaalp, H. S. (2012). Trends in Turkey's terms of trade from 1982 to 2011. Procedia -Social and Behavioral Sciences, 58 (2012), pp. 1228-1238.
  5. Hill, R., Griffiths, W. E., & Lim, G. C. (2011). Principles of Econometrics. USA: John Wiley & Sons, Inc.
  6. Narayan, P. K., & Smyth, R. (2005). Trade Liberalization and Economic Growth in Fiji. An Empirical Assessment Using the ARDL Approach. Journal of The Asia Pacific Economy, 10 (1), 96-115.
  7. Narayan, S., & Narayan, P. K. (2005). An empirical analysis of Fiji's import demand function. Journal of Economic Studies, 32 (2), 158-68.
  8. Nazlioglu, S., & Erdem, E. (2011). Exchange Rates and Turkish Fresh Fruits and Vegetables Trade with the EU Countries: Bilateral Trade Data Analysis. Journal of International Food & Agribusiness Marketing, 23 (2), 93-109.
  9. Nusair, S. A. (2017). The J-Curve phenomenon in European transition economies: A nonlinear ARDL approach. International Review of Applied Economics, 31 (1), 1-27.
  10. Okay, E., Baytar, R.A., Saridogan, E. (2012) The effects of the exchange rate changes on the current account balance in the Turkish economy. Iktisat, Isletme ve Finans, Vol.27, No.310, pp.79-101.
  11. Yeshineh, A. K. (2016). Determinants of Trade Balance in Ethiopia: An ARDL Cointegration Analysis. SSRN Electronic Journal.
  12. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16 (3), pp. 289-326.

Related papers

Turkish J- Curve: Trade Balance and Real Exchange Rate Relation
Şerife Gamze Albayrak

2019

This study investigates the relationship between trade balance and real exchange rate relation using available data from 1992:M1 to 2015:M12 in Turkey. I take real effective exchange rate, industrial production indexes for both Turkey and five developed high income trade partner countries (Germany, France, Spain, Italy and the USA) proxies for real exchange rate and income effects and imports to exports rate as proxy for trade balance. In this context, cointegration and causality tests are used to explain possible relationship between variables. Empirical findings suggest that in the long run exchange rate and foreign trade balance have a relation. For the period, there exists J-curve for a very short time. There are bidirectional causality relationship between real effective exchange rate to trade balance and national income levels of five developed trade partner to trade balance. On the other hand, there is unidirectional causality running from trade balance to national income of ...

View PDFchevron_right
Upon Relationship between Real Exchange Rate and Foreign Trade in Turkey
Emin Efecan Aktaş

5th International Annual Meeting of Sosyoekonomi Society, 2018

The aim of this study is to examine the effect of real exchange rate movements on the foreign trade balance for Turkey over the period 1998:1-2014:3. Pesaran et al. (2001) bounds testing procedure which is employed in this context asserts the existence of cointegration between foreign trade balance and national income, foreign income and real exchange rate. ARDL model implying long-run effects indicates the validity of Marshall-Lerner condition for Turkey in the considered period. According to the estimated short-run error-correction model based on ARDL, the short-run improvements in the exchange rate deteriorates the foreign trade balance, thus J-curve effect is valid.

View PDFchevron_right
Testing the Hypothesis of J Curve for Turkish Economy
İbrahim Özaytürk, süreyya yılmaz

The purpose of this paper is to find the relationship between balance of foreign trade and real exchange rate in econometrics concept by using time series method. The authors used annual data of foreign trade deficit, real exchange rate, gross domestic product (GDP) of Turkey from 1989 to 2014, and analyzed the long-term relation of them by using ARDL bound testing method. By the result of test method; although there was a long-term relationship between balance of foreign trade, real exchange rate, GDP of Turkey and of the world, the coefficient of real exchange rate was insignificant in terms of statistical methods. Turkey and the world as well as being statistically significant coefficient of GDP, it was concluded that there was significant relationship with the economic aspects.

View PDFchevron_right
Turkish J-Curve: Trade Balance and Real Exchange Rate Relation Türkiye J-Eğrisi: Ticaret Dengesi ve Reel Döviz Kuru İlişkisi
Hüseyin Servet Korkmaz, Şerife Gamze Albayrak

Selçuk Ün. Sos. Bil. Ens. Der. 2019; (Prof. Dr. Fuat Sezgin Özel Sayısı): 348-359 - İktisat / Araştırma - , 2019

This study investigates the relationship between trade balance and real exchange rate relation using available data from 1992 :M1 to 2015 :M12 in Turkey. We take real effective exchange rate, industrial production indexes for both Turkey and five developed high income trade partner countries (Germany, France, Spain, Italy and the USA) proxies for real exchange rate and income effects and imports to exports rate as proxy for trade balance. At this research paper, We will look at the case for Turkey foreign trade with selected trade partners and exchange rate policy relations. Solely devaluation/depreciation of the currency does not bring success to elimination of trade deficit. At these studies investigating j-curve hypothesis and Marshall Lerner condition, different models and econometric techniques are used. With different perspectives, these papers found different results. Some of them found evidence supporting j-curve hypothesis, on the other hand some others did not found evidence from empirical data. Empirical research show that this result does not exist for every country and every time. At this research paper, We will look at the case for Turkey foreign trade with selected trade partners and exchange rate policy relations. Solely devaluation/depreciation of the currency does not bring success to elimination of trade deficit. In this context, cointegration tests are applied in order to search short-run and long-run elasticities of the trade balance and currency depreciation/devaluation. Empirical findings suggest that in the long run exchange rate and foreign trade balance have a relation. For the period. results of the cointegration tests show that devaluation/depreciation has long run impacts on trade dynamics and for a short time there exists j-curve pattern for Turkey. According to Granger causality tests, there are bidirectional relations between income level of Turkey with trade balance, real effective exchange rate and foreign income levels respectively. Also there exists unidirectional relations between trade balance with real effective exchange rate and foreign income respectively. ÖZ Bu çalışmada, Türkiye'de dış ticaret dengesi ile reel döviz kuru arasındaki ilişki 1992:01-2015:12 verileriyle incelenmiştir. Türkiye ve yüksek gelir grubundaki beş gelişmiş ticaret partneri ülkenin (Almanya, İspanya, İtalya ve ABD) reel döviz kuru, gelir etkileri ve ticaret dengelerini analiz etmek üzere reel efektif döviz kuru, sanayi üretim endeksi ve ihracatın ithalatı karşılama oranı değişkenleri kullanılmıştır. Bu çalışmada, seçilmiş ticaret ortakları ile Türkiye dış ticaretine ve döviz kuru politikası ilişkisi incelenmiştir. Bu bağlamda sadece paranın devalüasyonu, ticaret açığının ortadan kaldırılması için yeterli değildir. J-eğrisi hipotezini ve Marshall Lerner durumunu inceleyen çalışmalarda farklı modeller ve ekonometrik teknikler kullanılmıştır. Farklı bakış açıları ile bu makaleler farklı sonuçlar bulmuştur. Bazıları j-eğrisi hipotezini destekleyen kanıtlar bulurken, bazıları ise ampirik verilere göre yeterli kanıt bulamamıştır. Ancak, ayarlama gecikmesi nedeniyle döviz kuru değişikliklerinin ticaret dengesi üzerindeki etkileri anlık değildir. Nitekim, ilk başta ticaret dengesi kötüleşecek ve iyileşme ancak gecikmeler gerçekleştikten sonra gelecektir. Hem iç hem de dış piyasaların tepkileri döviz kurundaki değişimin etkisini belirlemektedir. İthalat-ihracat esnekliklerinin toplamı Marshall Lerner koşulunun üzerindeyse, açık azalmaktadır. Marshall-Lerner koşulu karşılanırsa, para devalüasyonu/revalüasyonu uzun vadede ticaret dengesini iyileştirecektir. Bu çerçevede, ticaret dengesinin kısa vadeli ve uzun vadeli esnekliklerini ve para revalüasyonu/devalüasyonunu araştırmak için eşbütünleşme testleri uygulanmaktadır. Ampirik bulgular uzun vadede döviz kuru ve dış ticaret dengesinin bir ilişkisi olduğunu göstermektedir. İnceleme döneminde için eşbütünleşme testlerinin sonuçları, devalüasyon/revalüasyonun ticaret dinamikleri üzerinde uzun vadeli etkileri olduğunu ve kısa bir süre için Türkiye için j-eğrisi paterni olduğunu göstermektedir. İnceleme döneminde J eğrisi çok kısa bir süre geçerli olmuştur. Reel efektif döviz kuru ile dış ticaret dengesi arasında ve beş gelişmiş ülkenin ulusal gelirler düzeyleri ile dış ticaret dengeleri arasında Granger nedensellik testlerine göre, Türkiye'nin gelir dengesi ile ticaret dengesi, reel efektif döviz kuru ve yabancı gelir düzeyleri arasında iki yönlü ilişkiler bulunmaktadır. Öte yandan, Türkiye'de dış ticaret dengesinden ulusal gelir düzeyine doğru tek yönlü nedensellik bulunmaktadır.

View PDFchevron_right
An examination of bilateral J-curve: Evidence from Turkey and her 20 major trading partners
Şerife ÖZŞAHİN

Theoretical and Applied Economics, 2017

There are two methods to determine the impact of real exchange rate on balance of foreign trade. While previous studies, which aim to uncover the nexus between foreign balance and real exchange rate, use foreign trade statistics to measure the volume of foreign trade, some other recent studies utilize bilateral trade statistics. By following current literature, this study draws from the model of Rose and Yellen (1989) and analyzes the relationship between the volume of bilateral foreign trade and bilateral real exchange rate in Turkey and her 20 major trading partners for the period from 1995 to 2015. To this purpose, the presence of cross-sectional dependence among the countries was investigated, and long-term coefficients for each country were obtained with the Mean Group Estimator (MG) method developed by Pesaran and Smith (1995). In conclusion, the findings revealed that bilateral real exchange rate has a statistically significant negative effect on the bilateral foreign trade b...

View PDFchevron_right
580 California St., Suite 400
San Francisco, CA, 94104
© 2025 Academia. All rights reserved