An empirical study on the foreign trade relationship between Turkey and Central African countries (CEMAC)

Since the early 2000s, Turkey is making efforts to enhance political and trade relations with African countries. The focal point of this study is to look at the trade relations between Turkey and the Central African Economic and Monetary Union (CEMAC), which is an economic organization, established by including six countries Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea and Gabon from an empirical point of view. In this context, the effect of the USD / TRY exchange rate volatility on trade volume between Turkey and the CEMAC was examined. The exchange rate volatility was estimated using GARCH models and extensions. Eleven different GARCH extension models, in which innovations have eight different probability distributions, i.e. 88 models in total were compared according to information criteria and likelihood values. The Exponential GARCH (EGARCH) model, where innovations have a skewed-normal distribution, was found to be the most appropriate volatility model. Then, the relationship between exchange rate volatility and trade volume was investigated with the ARDL Bounds Test and it was revealed that there was cointegration between the two variables in the long run. According to the results of the ARDL Error Correction Model, when the equilibrium between the two variables is disturbed, it is seen that it reaches equilibrium again after 1.93 months.