Relationship between real exchange rate and foreign trade in OECD countries

With the increase of globalization, the world has become a big market in terms of economy, countries have entered into a fierce competition in order to obtain more advantage from foreign trade. In this competitive environment, the fact that free foreign trade is carried out with foreign exchange has made the exchange ratea very important factor in terms of foreign trade. In this context; Excessive fluctuations in the exchange rate directly and rapidly affect exports and imports, causing imbalance in foreign trade, and foreign trade imbalance, which leads to the deterioration of national economic stability. In the first part of this study, which is discussed in this context, exchange rate concepts, the formation of the equilibrium exchange rate in foreign exchange markets and the factors affecting it, theoretical approaches to the determination of the exchange rate and exchange rate systems are included, in the second part of study, the concepts of foreign trade, types of foreign trade, reasons, affecting factors, advantages and disadvantages, foreign trade policy and theories are explained, in the third part of study, the relationship between real exchange rate and foreign trade in OECD countries is tested economic by panel data analysis method. In the study, data sets with 910 observations compiled from the annual data of 35 OECD countries between 1995-2020 were used. Within the study, respectively: Cross-Section Depensency Test, Homogeneity Test, CADF (Cross-Sectional Augmented Dickey Fuller) Unit Root Test, Westerlund LM Bootstrap Cointegration Test, AMG (Augmented Mean Group Estimator) method, Dumitrescu ve Hurlin Causality Test were performed, and after the tests performed, a general evaluation was made and the study was concluded. According to the panel study, a strong relationship between real exchange rate, exports and imports in terms of both causality and long-term cointegration has been detected in OECD countries, It was concluded that the increase in the real exchange rate caused an upward increase in export rates and a downward decrease in import rates.