The effect of foreign trade on economic growth: A study with macroeconomic factors analysis

It is a fact that macroeconomic factors are related to economic growth. Foreign trade may have different effects on economic growth with the changes in other macroeconomic factors. The relationship between economic growth and foreign trade can be considered as one of the most fundamental research topics in economics. The main objective of this study is to measure the relationship between foreign trade indicators, namely imports and exports, foreign direct investments and inflation with economic growth and to provide a prediction for the level of economic growth for future periods. In this study, the relationship between economic growth and foreign trade and macroeconomic indicators in the Turkish economy is analyzed in terms of long-run and short-run. For this purpose, export, import and foreign direct investment variables are used in this study to determine the short and long run relationship between foreign trade and economic growth, while inflation variable is used as macroeconomic effect. The variables used in the study are obtained from the World Bank database. The data set consists of annual data for Turkey for the period between 1984-2021. The results of the study show that there is a significant long-run relationship between economic growth, exports, imports, foreign direct investment and inflation variables. However, according to the error correction model results, there is no significant adjustment mechanism between these variables in the short run. KEYWORDS: Foreign Trade, Economic Growth, Exports, Interest, Unemployment