The effect of inward processing regime on foreign trade: The case of Turkey

The customs regime that allows the supply of raw materials at global prices in order to enable companies operating in the field of manufacturing to compete in international markets and to increase diversity and competitiveness is called Inward Processing Regime (IR). In this study, the relationship with the inward processing regime, exchange rate and trade balance was measured by Gregory-Hansen and Hatemi-J cointegration tests. According to the findings, it has been determined that there is a one-way causality relationship from the inward transaction regime to the foreign trade balance in the short run, but there is no causality relationship between the exchange rate and the foreign trade balance in the short run. Keywords: Inward Processing Regime, Export, Import, Balance of trade