Terms of trade and economic development relationship: The case of Turkey

To date, various definitions, explanations have been made on the concept of terms of trade and many theories related to this concept have been put forward. This concept, which attracts the attention of economic scientists, acts as a unit of measurement for the profit or loss of the parties in the globalizing world. In the global world, where trade relations and commodity movements are increasing between countries, the price changes occurring in the goods in question are a big question mark that will affect the countries either positively or negatively. In this sense, the concept of terms of trade meets the answers to the questions and becomes important for the science of economics. Shortly, the concept of terms of trade, defined as the ratio of export prices to import prices, was first used by Ricardo and Mill, but it was Marshall who used the term trade terms first. While J.Stuart Mill deals with the reciprocal demand law, which expresses the amount of goods that the country will offer, in response to a certain quantity of imported goods that the country will demand, Marshall has taken this work to a further dimension and expressed the terms of trade in a geometric manner and for the first time symmetrical the curves of the two countries. has been dealt with. Thus, the offer curves were formed and the terms of trade explained more extensively. Although the changes in the terms of trade are a measure of the commercial relations of the countries, the impact on countries has caused differences in opinion by many economists. While classical economists favored the terms of trade for developing, raw material and agri-export countries, Singer and Prebish economists argued that the long-term exporters of agricultural products would develop against the terms of trade. Although the effects of the terms of trade on developing and developed countries is a controversial issue, this concept is still an important indicator that commercial relations are Improvement in terms of foreign trade means that export prices increase more rapidly than import prices, and a unit for this country receives more imported goods in return for export goods. Otherwise, the terms of trade are against the country. The country undergoes a loss of trade and decreases the level of prosperity. There is a strong relationship between economic growth and terms of trade, which is another subject of our study. One of the most important goals of an economy is to increase the rate of economic growth. Achieving this goal is possible by increasing exports. Because the increase in exports increases the production of goods and services, but also increases the competition. Increasing competition allows for better management, new technologies to increase and spread, to learn new skills and thus to increase productivity. New technology and productivity increase the rate of economic growth. In particular, developing countries play the role of Engine of Growth economy for exports to the economy with narrow domestic markets. The aim of the thesis is to shed light on the concept of terms of trade which is one of the building blocks of economics from the past to today. In this context, in the first part of the study, the definition of terms of trade and the methods of calculation are described. Then, the concept of terms of trade is covered by the theoretical framework. In the second part, the importance of economic growth theory for the countries, the natural resources that determine the concept of economic growth, capital, labor and technological developments are explained. Traditional growth theories are explained under two headings as classical pre-classical approaches and classical growth theory. Adam Smith, David Ricardo, Malthus, Marshall explained the differences between the economists' growth theories.Then, the Keynesian growth model, Neoclassical Growth Model and Endogenous Growth Model titles are described.In the third section of the study, alar Econometric Analysis of Trade Terms and Economic Growth ile section, literature research and then model and data set were made. In this study, data of 1990-2015 quarterly data taken from OECD and TUIK were discussed. In this study, the unit root test, which takes into account multiple fractures, was analyzed. The data analyzed are dependent on the GDP which expresses economic growth and unit root tests have been analyzed by forming the model as an independent variable. According to the empirical findings, a 1% increase in terms of trade leads to an increase of 0,667% on economic growth in the long run. Based on this result, the accuracy of the Harberger-Laurzen-Metzler effect, which asserts that a positive development in terms of trade, has a positive effect on real income, ie economic growth, is proved in the context of our country. While a 1% increase in real exchange rate has a positive effect of 1.526% on long-term economic growth, the openness (OP) variable has a positive and significant effect on economic growth. In this context, a 1% increase in openness leads to a 3.35% increase in economic growth.