The sensitivity of foreign trade to exchange rate changes: A study on Turkey and developing countries

With the development of globalization, information communication technologies and transportation, which have been more effective since the 1990s, one of the most effective economic tools between countries has been exchange rate and exchange rate policies. The applied exchange rate policies have a great impact on other macroeconomic variables, especially on foreign trade. Therefore, there are important problems in the country's economies regarding the selection of exchange rate policies and the implementation of these policies. It is of great importance that countries determine exchange rate policies that are suitable for their foreign trade structure and that the impact of foreign trade on other countries is well understood by the countries. While developing countries apply policies to increase the ir exports, they try to control many macroeconomic variables in order to increase ther export volume. The rates of change in exchange rates and the effects of these changes on economies are not at the same level for every country. Developing country economies are more affected by changes in Exchange rates due to their structural differences. In this study, the relationship between the real exchange rate and foreign trade of 17 developing countries, includingTurkey, was investigated. In the first part of the study, the concepts of foreign trade, the causes and theories of foreign trade, the factors affecting foreign trade, the aims and tools of foreign trade policies, the determinants and approaches of foreign trade, and finally the development of foreign trade in theTurkish economy are mentioned. In these cond part, a conceptual analysis of the exchange rate, such as the definitions of exchange rate, its types and systems, the factors affecting the exchange rate, exchange rate volatility and the exchange rate policies implemented in Turkey has been made. Finally, in the third part, the relationship between real exchange rate and foreign trade in developing countries and Turkey was tested with the help of panel data analysis and time series analysis using data from the period 1996-2020. First of all, a cross-section dependency test was performed between the variables and it was decided that there was a dependency between the countries. Thus, the CADF unit root test, which is one of these cond unit root tests, was applied. As a result of the application, it has been seen that the series are stationary in I(1) and provide the necessary condition for cointegration analysis. In order to test the long-term relationship of the series, ARDL cointegration analysis was performed and it was concluded that the increase in the real exchange rate increased exports in line with theoretical expectations and decreased imports