The relationship between export and export financing: The case of Turkey

During the global financial crisis in 2008, the world trade has experienced a large and severe collapse. Between 2008 and 2009, world exports and exports in Turkey decreased by 16 per cent and 22 per cent respectively. The recent research has shown that the slowdown in global demand and tight financing conditions are the main factors behind this drop in exports. This dissertation examines the reasons of the decline in exports in Turkey during global financial crisis and assesses whether the financing constraints have contributed to this collapse employing Markov regime switching approach. This dissertation aims to contribute to the literature in three ways: First of all, this study is the first one investigating the effect of trade credits on exports in Turkey during global financial crisis. Second, while the previous studies assume that there is a linear relation between exports and export credits, this study employs nonlinear methods to examine the determinants of exports. Finally, the dissertation explores the causality relation between exports and export credits using Markov Switching Granger causality analysis, which is a new method recently proposed in the literature. Our results based on Markov regime switching approach indicate that export credits have predictive power in explaining exports, but the effect of export credits on exports is found to be asymmetric. While export credits do not have a significant influence during expansions, export credits affect exports positively during contraction periods. This finding implies that adverse credit conditions play an important role on exports especially during contraction periods. Finally, the results based on Markov switching Granger causality analysis show that the causality running from export credits to exports seems to be stronger during the contractionary periods.