Determination of Turkey?s export to EU member states in terms of manufacturing industry through sectoral panel data analysis

In this study, Turkey?s export volume to European Union member states has been analyzed by using the sectoral panel data analysis method. The study covered the 22 sectors of the five EU member countries, namely Germany, England, France, Spain, and Italy, to which Turkey exported goods the most within the period between 1992 and 2001. The sectors of interest were those in the manufacturing sector and classified according to the international standard industrial classification (ISIC Rev.3). In the model used to identify the demand for export, sectoral added value, real effective exchange rate, capacity utilization index, and rate of investment in technology were employed as the independent variables. The data were analyzed through diagnostics, such as panel unit root and cointegration. For the estimation of models, pooled panel data estimation, fixed effect model estimation, and fully modified least square method were utilized. Further, it was tested whether Customs Union brought about any structural changes in the panel regression models. It was observed in the analyses that all the variables were first difference stationary. In the proceeding cointegration tests, it was concluded that the variables were conintegrated. It was found in the model estimations obtained for the pooled panel data that sectoral added value and real effective exchange rate were the variables affecting the demand for export. In the estimations for Germany and vii France, the result was that capacity utilization index was an important determinant. In the export to England and Italy, it was observed that investment in technology was not an important determinant. Comparable elaborate estimations and interpretations were made for each sector. With the testing of structural stability, it was concluded that after Customs Union coming into effect, there occurred an increase in most of the sectors in terms of the average export rate, whilst there did not happen a significant difference in the elasticity coefficients. Key Words : Panel data models, panel unit root, panel cointegration, fully modified least squares, fixed effect model, structural stability