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The effects of exchange rate fluctuations on exports: A sectoral analysis for Turkey

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  • Nergiz Dincer
  • Magda Kandil

Abstract

This paper examines the effects of exchange rate fluctuations on disaggregated data comprising 21 exporting sectors (BEC classification) in Turkey. Building on a theoretical model that decomposes movements in the exchange rate into anticipated and unanticipated components, the empirical investigation traces the effects through demand and supply channels. Anticipated exchange rate appreciation, in line with movements in underlying fundamentals, has significant adverse effects, contracting export growth across many sectors. Random fluctuations in the exchange rate, deviations around steady-state equilibrium, have asymmetric effects on sectoral export growth. The evidence indicates increased contraction of export demand to currency appreciation over time. In contrast, the effect of depreciation in stimulating export growth has lost momentum over time. While exchange rate fluctuations had a positive net effect on export growth before 2003, the net effect is negative for the post-2002 period. The implications are anticipated movement in the exchange rate guides export plans, signaling the importance of managing fundamentals to anchor rational forecasts. Moreover, less variability of the exchange rate is likely to improve sectoral export growth in Turkey over time.

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File URL: http://hdl.handle.net/10.1080/09638190903137214
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal The Journal of International Trade & Economic Development.

Volume (Year): 20 (2011)
Issue (Month): 6 (June)
Pages: 809-837

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Handle: RePEc:taf:jitecd:v:20:y:2011:i:6:p:809-837

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Cited by:
  1. Joseph Dery Nyeadi & Oswald Atiga & Charles Amoyea Atogenzoya, 2014. "The Impact of Exchange Rate Movement on Export: Empirical Evidence from Ghana," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(3), pages 41-48, July.

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