In this study, the effect of real exchange rate on bilateral trade balance
between Turkey and its 25 main trade partners is investigated for the period
of 1996 - 2015 with heterogeneous panel data techniques. Trade balance model
is estimated by using Mean Group (MG) estimator, which allows parameter
heterogeneity, Common Correlated Effects Mean Group (CCEMG), and Augmented
Mean Group (AMG) estimators, which both allow cross-section dependency and
heterogeneity. Results indicate that the real exchange rate elasticity of
the trade balance ranges between -0.40 and -0.45 and Marshall-Lerner (ML)
condition is valid for Turkey. According to the results, the foreign income
elasticity of trade balance ranges between 1.54 and 2.84, while for domestic
income elasticity, it is found between -0.75 and -1.38. Country-specific
results show that ML condition is valid for the USA, Belgium, Spain,
Switzerland, Romania, and Russia at the bilateral level according to both
CCEMG and AMG estimators.
Population Age Structure, Urbanization and Real Exchange Rate: An Empirical Study Based on G20’s Panel Data