The impact of exchange rates on Turkey's textile sector exports: A gravity model analysis of down, middle, and upper segments

Nowadays, globalization and financial liberalization have greatly increased trade mobility among world economies. Exports are very important in terms of helping countries finance their foreign debts and ensure economic stability by increasing their foreign exchange reserves. This increase in international trade has led to an increase in trade models between countries and the emergence of new theories. The gravity model is a model that has been frequently used in recent years, especially in the fields of international trade and economics, and has been used extensively in the theoretical literature. Essentially, it relates the size of trade between countries to the economic size of the countries and the distance between them. The basic idea in the gravity model is that the increase in the economic size of trading partners affects trade positively and distance of trading partners affects trade negatively. This study examines the impact of the exchange rate on Turkey's textile product exports, broken down into three different sub-segments (lower, middle and upper). Using the panel data analysis method for the years 2003-2022 considered in the study, the effect of the exchange rate on Turkey's textile product exports in 3 sub-segments will be examined separately. According to the analysis results, the impact of exchange rates on Turkey's textile exports varies across different segments. While the exchange rate has a positive effect on exports of lower-segment textile products, it has a negative impact on exports of middle and upper-segment textile products. This indicates that increases in the exchange rate boost exports in the lower segment, whereas they reduce exports in the middle and upper segments. However, overall, the impact of the exchange rate on all three segments is relatively low and not as significant as expected. These findings suggest that the exchange rate has limited importance on textile exports and that its effects differ by segment. Anahtar Kelimeler: Gravity Model, Exchange Rate, Export, Textile, Panel Data Analysis