Determinants Of The Trade Balance In The Turkish Economy

2017 ◽  
Vol 1 (2) ◽  
pp. 160
Author(s):  
Ali Ari ◽  
Raif Cergibozan
Keyword(s):  
Exchange Rate ◽  
Impulse Response ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Response Analysis ◽  
Impulse Response Analysis ◽  
Long Run ◽  
Turkish Economy ◽  
Effective Exchange ◽  
Effective Exchange Rate

<p class="AbstractText">The Turkish economy has a long-run problem of trade deficits. Several efforts and different policies over the last 50 years could not find any permanent remedy to this problem which is an important source of external vulnerability for the Turkish economy. Thus, this study aims to shed light on the trade balance dynamics in Turkey via Johansen cointegration test, vector error correction model, and impulse-response analysis, for the period 1987–2015. Estimation results indicate that in the long-run an increase in real effective exchange rate improves trade balance, while an increase in Turkish (foreign) income improves (deteriorates) trade balance. In the short-run, real effective exchange rate has no impact on trade balance, while an increase in domestic and foreign income negatively affects the Turkish trade balance. The impulse-response analysis also shows that the J-curve hypothesis does not hold for the Turkish case. </p>

scholarly journals Currency Depreciation, Trade Balance and Intra-Industry Trade Interactions in Turkey’s OECD Trade

2016 ◽  
Vol 8 (4) ◽  
pp. 8 ◽  
Author(s):  
Mehmet Demiral
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Series Data ◽  
Adjustment Process ◽  
Industry Trade ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

<p>This study re-examines the determinants of Turkey’s trade balance in its manufactures trade with 33 OECD-member countries for the short-run and the long-run. Unlike other studies, in the relationships we also control the moderating effects of the availability of import substitutes proxied by intra-industry trade. We analyze quarterly aggregated time-series data of the period spanning from 1998.QI to 2015.QIII, following the autoregressive distributed lag (ARDL) bounds testing approach to the cointegration and the error correction modeling. Estimation results reveal that real effective exchange rate, together with domestic and foreign incomes are still among the core determinants of Turkey’s trade balance in the manufacturing sectors. There is no significant impact of domestic final oil prices that also include all the taxes on gasoline. The trade balance depends on domestic income negatively and the aggregated income of the OECD countries positively. The finding that real depreciation of Turkish lira against to those of Turkey’s OECD trade partners improves trade balance in both the short-run and the long-run, indicates no evidence of J-curve adjustment process. Unsurprisingly, the intra-industry trade seems to be an important factor that moderates the elasticities of trade balance to its determinants, especially to real effective exchange rate and domestic income. Overall results underline the importance of import-substitution capability besides the export-oriented production to ease the longstanding large trade deficits for Turkey.</p><strong></strong>

scholarly journals Different Approaches to Merchandise Trade Balance in Pakistan

2020 ◽  
Vol 12 (Number 2) ◽  
pp. 19-30
Author(s):  
Yousuf Aboya ◽  
Arsalan Hussain ◽  
Rohail Hassan ◽  
Hassan Mujtaba Nawaz Saleem ◽  
Aamir Hussain Siddiqui
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Trade Deficit ◽  
Real Effective Exchange Rate ◽  
Series Data ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Merchandise Trade ◽  
Effective Exchange Rate

The current study empirically examines the three major approaches to trade balance for Pakistan by utilizing the yearly data from 1972 to 2016. Monetary, elasticity, and absorption approaches were tested by developing a model that incorporates all three approaches. The significant contribution of the study is that it uses only the merchandise trade deficit account, which includes trade of only physical goods. The study used time-series data; therefore, variables have been tested for the stationarity, and it is found that there is a combination of I (0) and I (1) variables, so ARDL bounds testing approach to co-integration has been employed to find the short run and long run associations among the variables. The bound test results discovered that there is a presence of stable long-term association among the merchandise trade deficit account, real broad money supply, real effective exchange rate, and real domestic absorption. The results further revealed that merchandise trade discrepancy is determined purely by the real effective exchange rate, which specifies that the exchange rate's devaluation increases the deficit in the long run whereas in the short-run increase in domestic absorption decreases the merchandise trade deficit.

Real Effective Exchange Rate, Broad Money Supply, and Trade Balance in Vietnam: An Empirical Analysis from Bounds Test to a Cointegration Approach

2020 ◽  
Author(s):  
Kieu Oanh Dao ◽  
V.C. Nguyen ◽  
Si Tri Nhan Dinh
Keyword(s):  
Exchange Rate ◽  
Money Supply ◽  
Trade Balance ◽  
Negative Impact ◽  
Positive Impact ◽  
Real Effective Exchange Rate ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

This paper aims to investigate the impact of the real effective exchange rate and broad money supply on the trade balance in Vietnam using quarterly data from the first quarter of 2000 to the fourth quarter of 2018. Using the ARDL-ECM approach to investigate this effect, a cointegration relationship exists between real effective exchange rate, broad money supply and trade balance. Results demonstrate that real effective exchange rate has a short-term negative impact on trade balance. Additionally, broad money supply has a positive impact on trade balance in the short run and long run with a very weak effect. Surprisingly, it was found that real foreign income and local income have no impact on trade balance.

scholarly journals The Effect of Depreciation of the Exchange Rate on the Trade Balance of Albania

2017 ◽  
Vol 17 (2) ◽  
pp. 141-158 ◽  
Author(s):  
Safet Kurtović
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Bounds Testing ◽  
The Real ◽  
Economies In Transition ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Exchange Rate Depreciation

AbstractAlmost all countries face the problems of trade balance, although they are more inherent in developing countries and economies in transition. A majority of economists adheres to a common opinion real depreciation may lead to an improvement of the trade balance. That said, countries encountering trade balance issues use real exchange rate depreciation in order to improve the trade balance situation. Albania belongs to the group of transition countries that has been facing negative trade balance over last two decades. National currency devaluations of the lek (ALL) have been used by Albania to improve its trade balance. Therefore, this paper intends to investigate the effect of the real effective exchange rate depreciation of the ALL on the trade balance of Albania using quarterly data from 1994 to 2015. Bounds testing cointegration approach, vector error correction model (VECM) and impulse response were used for empirical analysis. The results of the study show that there exists a long-term cointegration between the real effective exchange rate depreciation and the trade balance. Specifically, real effective exchange rate depreciation positively affects the trade balance of Albania in both the long-run and short-run indicating the weak presence of the J-curve effect. Important recommendations were derived from the results.

The Sources of Indonesia’s Current Account Balance Fluctuations: An Empirical Test of the Vector Error Correction Model (VECM)

2014 ◽  
Vol 2 (1) ◽  
pp. 16
Author(s):  
Tri Winarno
Keyword(s):  
Exchange Rate ◽  
Current Account ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Current Account Balance ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Exchange Rate Depreciation ◽  
The Current Account

Identifying the sources of current account balance fluctuations is critical to formulating Indonesia’s macroeconomic policies which maintain both internal and external balance to guarantee sustainable economic development as mandated by The Central Bank of Indonesia Act. This study is an attempt to investigate the long-run relationship between the current account balance (including total trade balance and non-oil and gas trade balance), world exports, domestic income (a proxy by industrial production index), and real effective exchange rate in the case of Indonesia’s economy. Based on the traditional approach of elasticity (Marshall Lerner condition) and by applying the VECM method to monthly data for the period January of 2008 up to December 2012, the investigation to examine the existence of a long-run equilibrium relationship between the current account balance and its sources is conducted. Additionally, variance decompositions (VDCs) and impulse response functions (IRFs) are used to draw further inferences. The result of the VECM method indicates that there is a stable long-run relationship between the current account balance and real effective exchange rate, domestic income and world exports variables. The estimated results show that real effective exchange rate depreciation is positively related to the current account balance in the long run, consistent with the Marshall Lerner condition. This study also finds evidence of the J-curve on Indonesia's current account balance. This suggests that following a real effective exchange rate depreciation, the Indonesia current account balance will initially deteriorate but improve in the long-run. Thus the exchange rate policy can help improve the current account balance. Furthermore, the results provide strong evidence that world exports and domestic income play a strong role in determining the behavior of the current account balance. 

scholarly journals The exchange rate, the trade balance and the J-curve effect in South Africa

2014 ◽  
Vol 17 (5) ◽  
pp. 601-608 ◽  
Author(s):  
Eric Schaling ◽  
Alain Kabundi
Keyword(s):  
South Africa ◽  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Long Run ◽  
J Curve ◽  
Curve Effect ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate

We find that for the period 1994-2011 there is robust statistical evidence that, in the long run, net exports are boosted by a weaker real effective exchange rate. However, this effect does not hold in the short run. We thus find empirical evidence supporting the J-curve effect for South Africa.

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