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The Determining Role of EU in Turkey's Trade Flows: A Gravity Model Approach

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Author Info

  • Ozgul Bilici

    ()
    (Department of Economics, Izmir University of Economics)

  • Erkan Erdil

    ()
    (Department of Economics, Middle East Technical University)

  • I. Hakan Yetkiner

    ()
    (Department of Economics, Izmir University of Economics)

Abstract

This paper aims to determine the role of EU in Turkey’s trade flows by using the gravity model. It also aims to test whether the Customs Union (of EU) that Turkey entered in 1996 made a deviation in Turkey’s trade flows. Regional trade agreements on the one hand create new trade opportunities (trade creation effect). On the other hand, these agreements may also lead to diversion from free trade (trade diversion effect). Turkey’s Customs Union agreement without becoming a member of EU provides a laboratory to researchers to test whether the agreement was significant enough to cause any deviation in Turkey’s trade flow. In the first part of the study, we shortly provide some descriptive statistics related to Turkey’s trade flows with EU to see whether EU has gained any weight in the flows. In the second part, we first develop a gravity model that econometrically designates the determinants of Turkey’s trade flows via panel data approach. Next, we use this equation to test the importance of EU countries in Turkey’s trade flow and whether the flow has been subject to a deviation after the Customs Union agreement. Our findings indicate that EU countries have always been important in Turkey’s trade flow and that Customs Union has increased EU’s importance marginally in determining Turkey’s trade flow.

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File URL: http://eco.ieu.edu.tr/wp-content/wp0806.pdf
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Bibliographic Info

Paper provided by Izmir University of Economics in its series Working Papers with number 0806.

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Length: 22 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:izm:wpaper:0806

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Web page: http://eco.ieu.edu.tr
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Related research

Keywords: Gravity model; Turkey; EU; Panel Data; Customs Union;

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Cited by:
  1. Kemal Türkcan, 2014. "Investigating the Role of Extensive Margin, Intensive Margin, Price and Quantity Components on Turkey’s Export Growth during 1998-2011," Working Papers 2014/2, Turkish Economic Association.
  2. Zumrut Imamoglu & Baris Soybilgen, 2012. "The Role of Economic Size and Distance in Turkey's Exports," Research Briefs 135, Bahcesehir University, Betam.
  3. Miran, Bülent & Atış, Ela & Bektaş, Zerrin & Salalı, Ece & Cankurt, Murat, 2013. "An Analysis of International Raisin Trade: A Gravity Model Approach," 2013 Conference (57th), February 5-8, 2013, Sydney, Australia 152200, Australian Agricultural and Resource Economics Society.

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