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Cointegration And Causality Among Exchange Rate, Export, And Import: Empirical Evidence From Turkey

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  • SEKMEN, Fuat

    ()

  • SARIBAS, Hakan

Abstract

This paper examines the cointegration and causality among exchange rate, export, and import for Turkey during the period of 1998-2006. The econometrics results show that there is a cointegration between exports and import, but direction of causality is bi-directional between these two variables. The impulse response functions also supports that there is a trade-off between exports and imports; for example, when imports are high, there is smaller exports at that time. This study supports few investigators who find no negative effect of exchange rate volatility on trade volume since it is found that exchange rates cannot determine the variation in exports and imports.

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Bibliographic Info

Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

Volume (Year): 7 (2007)
Issue (Month): 2 ()
Pages: 71-78

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Handle: RePEc:eaa:aeinde:v:7:y:2007:i:2_5

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Related research

Keywords: Export; Import; Exchange Rate; Cointegration; and Impulse Response Function;

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References

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  1. Giovanni Dell'Ariccia, 1998. "Exchange Rate Fluctuations and Trade Flows," IMF Working Papers 98/107, International Monetary Fund.
  2. Joseph E. Gagnon, 1989. "Exchange rate variability and the level of international trade," International Finance Discussion Papers 369, Board of Governors of the Federal Reserve System (U.S.).
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  4. Grobar, Lisa Morris, 1993. "The effect of real exchange rate uncertainty on LDC manufactured exports," Journal of Development Economics, Elsevier, vol. 41(2), pages 367-376, August.
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  7. Mckenzie, Michael D., 1998. "The impact of exchange rate volatility on Australian trade flows," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 8(1), pages 21-38, January.
  8. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  10. Rose, Andrew, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," Seminar Papers 678, Stockholm University, Institute for International Economic Studies.
  11. O. Cushman, David, 1986. "Has exchange risk depressed international trade? The impact of third-country exchange risk," Journal of International Money and Finance, Elsevier, vol. 5(3), pages 361-379, September.
  12. Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
  13. Broll, Udo, 1994. "Foreign Production and Forward Markets," Australian Economic Papers, Wiley Blackwell, vol. 33(62), pages 1-6, June.
  14. Franke, Gunter, 1991. "Exchange rate volatility and international trading strategy," Journal of International Money and Finance, Elsevier, vol. 10(2), pages 292-307, June.
  15. Kroner, Kenneth F. & Lastrapes, William D., 1993. "The impact of exchange rate volatility on international trade: Reduced form estimates using the GARCH-in-mean model," Journal of International Money and Finance, Elsevier, vol. 12(3), pages 298-318, June.
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Cited by:
  1. SEKMEN, Fuat, 2008. "Is Current Account Deficit A Message For Economic Crises For Turkey," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(1), pages 49-60.
  2. Erten, Irem & Okay, Nesrin, 2012. "Re-examining Turkey's trade deficit with structural breaks: Evidence from 1989-2011," MPRA Paper 56191, University Library of Munich, Germany.

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