Investigating the Impacts of Exchange Rate and Inflation on Exports: A Double Threat or Opportunity for Turkiye?
TLDR
Exchange rate appreciation and inflation negatively impact Turkiye's exports, while FDI and imports boost export performance.
Key contributions
- Used 1995-2023 annual data with Johansen cointegration and DOLS methods.
- Real effective exchange rate appreciation reduces exports by 18.5%.
- Inflation decreases exports by 12.5%, highlighting economic risks.
- FDI and imports positively influence exports, aiding trade growth.
Why it matters
This paper reveals how exchange rate and inflation hinder Turkiye's exports, emphasizing the need for stable policies. It also shows FDI and imports can enhance export performance, guiding economic strategy.
Original Abstract
This study analyzes the impacts of exchange rate and inflation on exports in Turkiye. Annual data for the period 1995-2023 were used in the analysis. The Johansen cointegration analysis and Dynamic Least Squares (DOLS) method were employed in the study. Identifying the cointegration relationship enabled the estimation of the long-run coefficients. The results show that an increase in the real effective exchange rate (appreciation of the Turkish lira) and inflation reduce exports with coefficients of -0.185 and -0.125, respectively. Foreign direct investment and imports, added to the study as control variables, have a positive impact on exports with coefficients of 0.117 and 0.849, respectively. These findings indicate that exchange rate stability and inflation control are priorities for improving foreign trade performance. Furthermore, policies that increase foreign direct investment and strategically manage imports complement this process.
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