Commodity-based approach to income and price elasticity of foreign trade of Turkey

The current account balance, which is one of the determinant indicators of the macroeconomic performance of a country, also has great importance in the international prestige of that country. Taking this uncertainty in the country's economy into account has been becoming a precondition for the success of the economy managements. Therefore, the primary objectives of the economic administrations are to remove the ambiguity with the policies aiming to realize this balance and to make the country a center of attraction in terms of foreign capital. In Turkey, which is one of the countries where the chronic current account deficit is encountered, the foreign trade deficit is the most important reason for the current account deficit. In this context, the purpose of our study is to shed light on the policy implementations regarding the foreign trade deficits by analyzing Turkey's foreign trade as sectoral and country based, within the scope of income and price indicators. The study, which investigates income and price elasticities of foreign trade between Turkey and the 10 OECD countries with the highest trade volume with Turkey, was calculated with the help of 8 (eight) separate export and import models, which included 4 (four) different goods groups' foreign trade data. In the study, where the quarterly data from 1998Q1-2014Q4 were used; The Marshall-Lerner condition, which presents the influence of the foreign exchange over the foreign trade balance, and the foreign and domestic income elasticities, which show the effect of the income variable on the foreign trade balance, have been tested separately for each model. Additionally, all analyzes were performed using the ARDL econometric model. The study results have revealed that the Marshall-Lerner rule is not applicable for the foreign trade of any goods, and the coefficients of foreign income variables, except for especially consumption and total export goods models, have strong effects on both imports and exports.