Impact of Unorthodox monetary policy on sectoral international trade performance

This study aims to determine the impact of unorthodox monetary policy implemented in Turkey on sectoral foreign trade performance. In this study, Turkey's sectoral foreign trade data for the period January 2010 – May 2023 are analyzed. Monthly exports and imports data of agriculture and forestry, mining and quarrying, manufacturing industry and wholesale and retailing sectors, which contain a large portion (%99) of the country's whole international trade volume at sectoral level, are analyzed using exchange rates, funding cost of central bank of Turkey (interest rates) and production indices of EU and Turkey. Within the scope of the study, the relevant variables were estimated with long and short-run models by applying the ARDL bounds test by analyzing the sectors. Unorthodox monetary policy is corresponding to the latest observations between March 2021 to May 2023. The findings show that Turkish Lira depreciation against the basket exchange rate index and exports in most sectors are positively correlated, while funding cost (interest rates) and imports are negatively correlated. Increases in production indices of EU and Turkey have a positive effect on both exports and imports. The unorthodox period dummy shows that this period had a significant effect on both exports and imports of all sectors excluding wholesale and retail imports. An analysis of the sensitivity of different sectors to the macroeconomic factors studied as control variables reveals that their impact varies according to sectoral characteristics.