The relationship between exchange rate and foreign trade in Turkey

In the globalizing world, the foreign trade deficit, which is a critical economic problem in developing countries such as Turkey and the factors that lead to this deficit have been and continue to be the subject of studies. The purpose of this study is to investigate the relationship between foreign trade balance and real effective exchange rate. This study consists of four chapters. In the first chapter of the study, the general framework regarding foreign trade is presented. In the second chapter, the concept of real effective exchange rate, theories and effects are evaluated. In the third chapter, literature research has been done. In the fourth chapter is the application part, which is the main purpose of the study. Turkey in 2003: Q1-2018: Q3 periods discussed, stability analyzes were carried out, the ARDL method was utilized for short and long term analysis. CPI based (2003 = 100) real effective exchange rate: RDK, economic growth: GDP (balance of goods): DA variables are included in the ARDL analysis method. According to the results of this analysis, it was determined that there was a cointegration relationship among the variables and the ARDL model was established, the explanatory power of the model was found to be as high as 0.91 and it was found to be significant. Although there is a significant relationship between the RDK series and the DA dependent variable in the long run, this relationship was not significant in the short term. Although DA variable is affected by RDK in the long term, it is not affected in the short term. Also, CUSUM and CUSUMSQ graphs were examined to look at the stability of the model and it was concluded that there was no break for the variables.