Import Dynamics in Turkish Republic of Northern Cyprus

This thesis attempts to investigate the import dynamics for Turkish Republic of Northern Cyprus (TRNC) by using the ARDL approach to cointegration for the period 1977 to 2018. More specifically, this study aims to analyse the impact of real domestic income, real exchange rate and external macroeconomic instability on imports of TRNC. The results indicate a long-run cointegration relationship among the three variables. The findings of this study suggest that while domestic income positively affects imports of TRNC, the external macroeconomic instability affects imports negatively. However, real exchange rate has no effect on imports. Our results implies that the special relationship between TRNC and Turkey and the use of common currency unfavourably affects the import dynamics of TRNC. Also, the results reveal that the income is the main domestic indicator that affects TRNC’s imports.