The possible effects of exchange rates policies in Turkey

With the liberalization of capital movement of last thirty years, the abandonment of fixed exchange rates, the revolution of information technology and expansion of process in large proportions have provide very quick development in financial market. The effect of higher financial development became the reason of borrowing from international economical market easier than before, and caused transformations of current account cycle. It also led to increase of countries that have current account deficit in their budget. At the end, the current account deficit stayed permanently for economy. With the increasing of account deficit in countries' debt became the reason of the most important indicator of macroeconomic performance for them. Thus, having a decisive role in financial market decisions, the expectation for economic market, and the higher fragility of countries for economic crisis made the current account deficit extremely important for their economy. The purpose of this study is to determine the relationship between the policy of exchange rate and the trade balance of countries. These two factors are the major causes of the current account deficit for Turkish economic depressions after 1980s. It also helps us, if there is, for the prove the direction of the relationship. For this reason, used the methods of time series and found data about the foreign trade deficit of Turkey that is between 1995 – 2015. Moreover, provide some more information those are about real exchange rates of Turkey, beside Gross Domestic Product variables of Turkish economy and OECD in quarterly periods. The presence of long run relationship was analyzed by ARDL approach. The result of this analyzed shows that there is a long-term relationship between the real exchange rate and the trade balance in terms of Gross Domestic Product for Turkey and OECD. It also give us the idea that the real exchange rate coefficients are statistically insignificant. However, the Gross Domestic Product coefficients of Turkey and OECD are statistically significant and they are economically meaningful in term of the relationship among them.