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Asymmetric cointegration with threshold adjustment model of exchange rates and the trade balance in Turkey

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  • Dincer Dedeoglu
  • Kaan Ogut

Abstract

This paper aims to investigate the long-run equilibrium relationship between the trade balance and exchange rates in Turkey using the asymmetric error correction model with threshold cointegration. The results provide new evidence for the asymmetric long-run relationship between the trade balance and exchange rates. Besides, deviations from the long-run equilibrium due to a relative increase in real exchange rates have a lower speed of adjustment in comparison to the deviations caused by a relative decrease in real exchange rates.

Suggested Citation

  • Dincer Dedeoglu & Kaan Ogut, 2017. "Asymmetric cointegration with threshold adjustment model of exchange rates and the trade balance in Turkey," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(2), pages 174-194, February.
    • Handle: RePEc:taf:jitecd:v:26:y:2017:i:2:p:174-194
    DOI: 10.1080/09638199.2016.1233288
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    References listed on IDEAS

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    1. Duasa, Jarita, 2009. "Asymmetric cointegration relationship between real exchange rate and trade variables: The case of Malaysia," MPRA Paper 14535, University Library of Munich, Germany.
    2. Cletus C. Coughlin & Patricia S. Pollard, 2004. "Size matters: asymmetric exchange rate pass-through at the industry level," Working Papers 2003-029, Federal Reserve Bank of St. Louis.
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