Exchange rate fluctuations and Turkey's export performance: Insights across industries and trade partners

This study examines the impact of exchange rate volatility (ERvol) on Turkey's export performance over the period 2003–2023, highlighting heterogeneity across industries and trading partners. The analysis covers nine of Turkey's major export markets and six key product sectors. Using econometric techniques, particularly Ordinary Least Squares (OLS) regression, the study quantifies the relationship between ERvol and sectoral export values while controlling for GDP of Turkey, GDP of trade partner, inflation, the Real Effective Exchange Rate (REER), and average exchange rates. The OLS results confirm that heightened exchange rate volatility generally has a significant negative effect on export values, though the magnitude of this impact varies by sector and destination. Complementary correlation analysis reveals consistent patterns across trade partners: notably, maintaining a stable or competitive REER emerges as a stabilizing factor for export performance, and certain industries—especially machinery and chemicals—exhibit heightened sensitivity to currency fluctuations. The results also indicate that exports to advanced economies tend to be more resilient to volatility shocks, whereas those to less diversified or emerging markets experience more pronounced adverse effects. These findings expose distinct sector-specific and partner-specific vulnerabilities, underscoring the need for targeted strategies to manage exchange rate risk. Accordingly, policymakers and exporters are advised to implement tailored measures to mitigate the adverse impacts of currency fluctuations and bolster the stability of Turkey's export performance under volatile exchange rate conditions.