Import, export and real exchange rate effects on foreign trade balance: Time series analysis

In this thesis, short and long-run impacts of the depreciation of the Turkish lira on the bilateral trade balance between Turkey and her 8 trading partners are estimated with linear and non-linear ARDL approaches. The empirical results of the ARDL approach have shown that there is no cointegration relationship in Turkey's bilateral trade with Russia, the USA, and China. The depreciation of the national currency of Turkey has positively affected the trade balance of Turkey's bilateral trade with France, Spain, Italy, and Germany in the long run. According to the empirical results of the NARDL model, depreciation of the Turkish lira has positively affected Turkey's bilateral trade between France, Spain, Russia, Germany, and Italy in the long run. The empirical results have supported the J- curve effect in Turkey-Italy and Turkey-Russia bilateral trade. It has been shown that the depreciation of the Turkish lira positively affected the trade balance of Turkey's bilateral trade with France and Spain both in the short and long terms. It has been concluded that the effect of real exchange rate changes in Turkey's trade balance with France, Spain, Russia, and the UK are asymmetrical.