İnternational trade between American countries and Turkey: An econometric analysis

The main purpose of the study is to analyze the factors which effects the trade volume between Turkey and the most important countries of Continental America. At the same time, this is the first academic and econometric approach performed for studying the international trade relations between the Continental America and Turkey. For the study, data is gathered from the World Bank Database as well as other websites, such as COMTRADE, Heritage Foundation, OECD, OEC, Tradingeconomics, TÜİK and UNCTAD; however due to the lack of information and statistics the study researches 10 years period from 2005 to 2014. Even more, this research does just contain the fourteen most relevant countries in terms on trade volume between Continental America and Turkey, and then three econometric models are conducted. The first econometric model (International Cost of Trade) showed that a decrease on the distance factor generates a positive effect on the bilateral trade volume. At the same time, it was observed that a decrease on the time for export for American countries has a positive effect on the bilateral trade volume. The second econometric model (Gravity Model) demonstrated that an increase on the GDP and a decrease on the distance factor, as it is denoted into the Gravity Model formula, has a positive relation on the bilateral trade volume. Therefore it is posible to suugest that the gravity model is suitable for analyzing the bilateral trade relations between Continental America countries and Turkey. The third econometric model (Foreign Direct Investment) showed that there is a positive relationship between the trade freedom index and the foreign direct investment. It was also observed, and against the expectation, that, there is a positive relation between the foreign direct investment and the inflation rate. Finally, it was observed that there is a positive relation between the foreign direct investment and the corruption index and the GDP. Key words: International Trade Costs, Gravity Model, Foreign Direct Investment, Trade Volume, Economic Freedom Indexes