Commercial relationship of Turkey with European Union and Shanghai Cooperation Organization countries: Empirical analysis with panel shape model approach

The Gravity Model, which has been the subject of research in the last century, predicts bilateral trade flows between trading partners in terms of economic size and distance. The model developed by Tinbergen (1962) was criticized in its first applications due to its lack of theory, but the empirical prediction power of the model increased with the contributions made over time. In this study, the Gravity Model was investigated in detail. Turkey's foreign trade relationship with the European Union (EU) and Shanghai Cooperation Organization (SCO) were analyzed with the panel gravity model using annual data for the 2003-2017 period. In the study, export, import and total trade were used as dependent variables. The gross domestic product (GDP) figures as the indicators of the economic sizes of the countries, the distance variable representing the distances of the countries from each other, and the real exchange rates were used as independent variables, while the economic crisis in 2008 was used as dummy variables. With the models created, the trade relationship between Turkey, EU and SCO countries was investigated by panel attraction method and the estimation results were interpreted.