The relationship between trade policy and economic growth: Comparison of protectionist policies and free trade in economy of Turkey

Free trade policies and protective policies are two basic methods that countries apply in international trade relations. Depending on the cyclical situation and sectoral crises, both policies have remained in effect from time to time. Both of these policies have their own advantages and disadvantages according to the countries and sectors. In global competition, the effectiveness of protective policies is gradually weakening and free trade policies are widespreading. The effect of the World Trade Organization on that is dominant. In this study, the comparison between both trade policies have been tested with time series analyzes over variables of economic growth and foreign trade. In the analyzes using annual data covering the 1924-2015 period, the model was constructed upon import and export variables and growth data, cointegration and causality relationship between the variables were tried to be identified. In the analyzes, among the stationary tests, Augmented Dickey-Fuller (ADF) and Phillips and Perron (PP) unit root tests were used to determine whether the series contained unit roots. Then, the Engle-Granger Cointegration Test and the Maki Cointegration Test, taking structural breaks into account, were used for determination of the cointegration relations between the series. Finally, causality relationship between variables were tested, and, fort his, Granger Causality, Hacker and Hatemi-J Causality tests were used. In the analyzes carried out, the series were found stable at the level values. In the Engle-Granger cointegration test, there was no long-run relationship between variables. However, in the Maki cointegration test, it was seen that there was a cointegration relation within the structural breaks. According to the Granger causality test and Hacker and Hatemi- J causality test results, only one-way causality relationship between national income and import was determined. Key Words: Free Trade Agreements (FTA), Protectiveness in international trade, Economic Growth, Maki Cointegration.