Production effect of exchange rate policy: The case of Turkey

The effect of exchange rate on national production is a complex mechanism whose elements change constantly depending on the current economic situation. By examining the factors that determine this type of effect, it is necessary to consider the changes in the intensity of the direct and indirect effects. In this study, the resulting impact on production developments in the real exchange rate in Turkey has tried to be analyzed, for example. Keeping an overvalued national currency against foreign currencies for different purposes in Turkey has led to a significant impact on the economy. With the transition to the flexible exchange rate system in 2001, the increase in real exchange rates became more evident and this situation led to structural transformations in the production and foreign trade sector. While the import dependency ratios of production and exports are increasing, it has been determined that the increases in production take place in relatively technology-intensive sectors with high import dependency. Our thesis examining the dynamics of foreign trade production of Turkey is to evaluate the effects of the real exchange rate change. For this purpose, it is examined empirically whether the determinants of exports, imports and production are also dependent on industry-specific variables such as technology intensity, product competence, import dependence, export orientation, degree of integration into global value chains, and debt dollarization.