Effect of exchange rate on foreign trade structure between Gulf countries and Turkey: A research on the years 2003-2018

The purpose of this study is to analyze the structure of the relationship between the real effective exchange rate between Turkey and the Gulf countries foreign trade balance with the Panel ARDL Econometric Model. There are many studies in the literature examining the relationship between real exchange rate and foreign trade balance. Today, Turkey's growing political, economic and social relations with the Gulf countries also arises the aim and importance of this study. Both ARDL model and panel ARDL model are used for each country to investigate the long and short term effects of real effective exchange rate on foreign trade balance. ADF Unit root test, ARDL cointegration test, ARDL long-short term comparison and Granger Causality test were applied for ARDL model. For the UAE alone, the long-short-run relationship between REER and the foreign trade balance was significant. LLC, Fisher ADF ve Fisher PP unit root tests, Pedroni ve Kao panel ARDL cointegration test, Panel ARDL long-short term comparison and Dumitruscu ve Hurlin PanelCausality test were applied. LnREER coefficient was positive in long term and negative in short term. However, p value was not statistically significant for both periods. Panel error correction coefficients and country-based error correction coefficients were found to be negative and statistically significant.