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The Dynamic Effect of ExchangeRate Volatility on Turkish Exports: Parsimonious Error-Correction Model Approach

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  • Erdal Demirhan

    (Department of Economics, Afyon Kocatepe University, Turkey)

  • Banu Demirhan

    (Department of Economics, Afyon Kocatepe University, Turkey)

Abstract

This paper aims to investigate the effect of exchange-rate stability on real export volume in Turkey, using monthly data for the period February 2001 to January 2010. The Johansen multivariate cointegration method and the parsimonious error-correction model are applied to determine long-run and short-run relationships between real export volume and its determinants. In this study, the conditional variance of the GARCH (1, 1) model is taken as a proxy for exchange-rate stability, and generalized impulse-response functions and variance-decomposition analyses are applied to analyze the dynamic effects of variables on real export volume. The empirical findings suggest that exchangerate stability has a significant positive effect on real export volume, both in the short and the long run.

Suggested Citation

  • Erdal Demirhan & Banu Demirhan, 2015. "The Dynamic Effect of ExchangeRate Volatility on Turkish Exports: Parsimonious Error-Correction Model Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 62(4), pages 429-451, September.
  • Handle: RePEc:voj:journl:v:62:y:2015:i:4:p:429-451
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    1. Osama M. Badr & Ahmed F. El-khadrawi, 2018. "Exchange Rate Volatility and Trade: An Empirical Investigation from the Egyptian Economy," Applied Economics and Finance, Redfame publishing, vol. 5(4), pages 140-149, July.

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    Keywords

    Exchange-rate volatility; Export function; Parsimonious errorcorrection model; Cointegration; Turkey;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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