A structural analysis of Turkish foreign trade

ABSTRACT 24 January 1980 Decisions can be defined as a turning point of the Turkish economy. The basic characteristic of the policies applied within the framework of these decisions is the change of import substitution growth strategy by export-led growth strategy. Foreign trade liberalization in accordance with the export-led growth has led to a high increase in foreign trade volume after 1980. Especially during 1990s altough the Turkish economy was in on unstable situation, foreign trade has a big share in national product, consequently analyzing the effects of the foreign trade on the whole economy is getting much more important. The aim of this study is that to develop proposals about restructuring and redirecting Turkish foreign trade, due to the fact that the results of economic analysis have been verified by econometric analysis. Recently, foreign trade can not be explained by foreign trade theories as it has a more complex structure than before. So the Turkish foreign trade was trying to be analyzed by its endogenous dynamics. In relation to structural transformations in the Turkish economy, the development of Turkish foreign trade has been analyzed in three subperiods; before 1980, 1980-1989 period and after 1989. In general in the Turkish economy it is demonstrated that, economic growth was led continued by imports. On the other hand, both the unsufficient increase in export and the low domestic saving rate has made the financing of import an important problem. As a result, in the last twenty years financing of import was the basic determinant of the development of Turkish economy, so the economic growth. After the evaluation within the framework of macroeconomic development, econometric analysis has been applied in sectoral part of both import and export. By econometric analysis regression functions were estimated, price and incomeelasticities were calculated and reliability of regression results were tested by cointegration analysis. In the import analysis asserted, regression results have stated that Turkish import is very sensitive to the economic growth. If we take into consideration the low level of price elasticity of import, it can be said that Turkish import is going to be increase incredibly during the periods of high economic growth. In that sense, it can be argued that income effect is larger than the price effect in import. In the analysis of export, the results shows that export has a far higher sensitivity to the income changes than to the price changes. If it is taken into consideration the high level of income elasticity, it can be argued that export may be increased through increasing foreign demand or creating new capacities which have high income elasticities. In accordance with these results and taking into consideration the existing structure of Turkish economy, it can be argued that to establish a stable structure in foreign trade in the medium and long term, the interdependency of import and export should be diminished. This can be possible by creating new capacities which will led to import substitution of capital and intermediate goods. In this context; Turkey's production structure is dependent to imports and the increased export should be the best way of foreign exchange revenue, which is essential to finance the import soundly. The existing capacity utilization ratios show that it's necessary to replace existing export capacities with new ones.