Effects of the Custom Union on relative prices at Turkey

ii SUMMARY A Customs Union has been established between Turkey and the European Union on 1 January 1966. This fact is beyond doubt an important step in terms of Turkey's political preferences, but at the same time marks a significant development for the Turkish economy. Therefore it is of utmost importance to capture the effects of the Customs Union on the Turkish economy and be ready I o solve problems most likely to be encountered. We believe thai in analyzing the economic effects of Customs Union membership, this work will enable the revelation of a specific aspect of the Turkish economy, namely the effects of Customs Union on prices in Turkey. Since price mechanism, constitutes the point of departure in the process of economic decioii-making, it is crticial to make correct estimations and evaluations relating to future price movements, so I ha I economic units and policy makers will be provided the required reference points. The First Section of this work concentrates on the economic effects of the customs unions from a theoretical point of view. The Second Section also from the theoretical viewpoint tries to illumi nate the changes in relative prices and the economic effects of the elimination of customs tariffs and devaluations. In the lasl seel ion. where empirical analysis relating to the nature and direction of price movements that will take place has been embodied, changes in prices resulting both from the abolishment of customs duties and Ihe devaluation have been explained. Also in this last seel ion. a rate ofİti exchange that can secure external balance has been calculated and our analysis developed within this context, hi the "Conclusion", an evaluation of the results of our analysis has been made.