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Turkey's Recent Trade and Foreign Direct Investment Performance

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Author Info

  • Kamil Yilmaz

    ()
    (Koc University)

  • Umit Izmen

Abstract

This paper analyzes the changes in the structure of trade as well as the developments in the capital account of Turkey since mid-1990s and discusses the possible composition of trade flows and Turkey’s attractiveness for international capital inflows in the near future. Analysis of the long-term performance of Turkish exports and imports reveals that the efforts to increase exports were successful only to a certain degree. The country’s large trade deficit with the rest of the world accumulates over time and frequently ends up with a crisis which automatically reduces the trade deficit by reducing the imports. Since 2001 the transformation of exports from the low-tech products to medium-tech and to a certain degree high-tech products has taken place. While this transformation helped bring the trade deficit with the EU down, it contributed to the widening of trade deficit vis-à-vis the Asian countries and oil exporters. The initiation of the EU accession talks in 2005 invigorated the expectations for a more rapid and consistent implementation of the rules and regulations that ensure a level playing field for all companies, domestic and foreign, alike. The EU accession process enabled Turkey to attract record levels of FDI inflows. Almost all of the FDI inflows over the last four years have been composed of mergers and acquisitions, and directed mostly to service sectors and the real estate. From a longer term growth perspective Turkey needs to attract greenfield investments, especially in the manufacturing industries. In order to put Turkey in international producers’ networks the current investment environment should further be improved by the implementation of long-delayed microeconomic structural reforms as well as judicial and legal reforms.

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File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_0902.pdf
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Bibliographic Info

Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 0902.

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Length: 31 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:koc:wpaper:0902

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Related research

Keywords: Turkey; European Union; Foreign Trade; Current Account; Capital Account;

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References

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  1. Kamil Yılmaz & Şule Özler, 2007. "Productivity response to reduction in trade barriers: Evidence from Turkish manufacturing plants," Koç University-TUSIAD Economic Research Forum Working Papers 0704, Koc University-TUSIAD Economic Research Forum.
  2. Roberto A. De Santis, 2001. "The 1990 Trade Liberalisation Policy of Turkey: An Applied General Equilibrium Assessment," International Economic Journal, Taylor & Francis Journals, vol. 15(2), pages 115-132, June.
  3. Kaminski, Bartlomiej & Ng, Francis, 2006. "Turkey's evolving trade integration into Pan-European markets," Policy Research Working Paper Series 3908, The World Bank.
  4. Ahmet Faruk Aysan & Yavuz Selim Hacihasanoglu, 2007. "Investigation on the Determinants of Turkish Export-Boom in 2000s," Working Papers 2007/19, Bogazici University, Department of Economics.
  5. Erol Taymaz & Kamil Yılmaz, 2008. "Integration with the Global Economy: The Case of Turkish Automobile and Consumer Electronics Industries," Koç University-TUSIAD Economic Research Forum Working Papers 0801, Koc University-TUSIAD Economic Research Forum.
  6. Gruben, William C. & McLeod, Darryl, 1998. "Capital Flows, Savings, and Growth in the 1990s," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 1), pages 287-301.
  7. Togan, Sübidey, 1997. "Opening up the Turkish Economy in the Context of the Customs Union with EU," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 157-179.
  8. Bernard M. Hoekman & Togan Sübidey, 2005. "Turkey : Economic Reform and Accession to the European Union," World Bank Publications, The World Bank, number 7494, October.
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Citations

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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. Yalta, A. Yasemin & Demir, Ishak, 2010. "The Extent of Trade Mis-Invoicing in Turkey: Did Post-1990 Policies Matter?," MPRA Paper 30186, University Library of Munich, Germany.
  3. Burak Güris & Burcu Kiran, 2011. "Foreign Trade Deficit Sustainability of Turkey," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 167-174.

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