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Aggregate Imports and Expenditure Components in Turkey: Theoretical and Empirical Assessment

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  • Guncavdi, Oner
  • Ulengin, Burc

Abstract

After the economic turmoil in 2001, the Turkish economy quickly recovered, and exhibited distinguished economic performance in successive years without any interruption. This success can be considered as a product of favourable international economic conditions, sound macroeconomic reforms, the beginning of the accession talks with the EU and political stability with a single party government. All these favourable conditions have allowed the Turkish economy to not have experienced any financial restraints in financing this distinguished economic performance. While increased expenditure, particularly in consumption and investment, together with high foreign demand for Turkish production, appear to have played an important role in these growth rates, the economy has begun to experience a large surge in imports and current account deficits in response to an increase in domestic expenditure. The purpose of this paper is to examine the role of macroeconomic components of aggregate expenditure in determining import demand in Turkey. Along with the empirical assessment, the paper also suggests a theoretical model of import demand, which is built upon a utility maximization of a country subject to budget constraints. The empirical model derived as a dynamic form of linear expenditure system was estimated with quarterly data from the Turkish economy for the period of 1987-2006. The results show that consumption and expenditure are two important demand components in determining imports in the long run whereas only the growth rates of consumption and investment are dominant factors in the short run. Public expenditure appeared to have no significant impact on import demand in Turkey.

Suggested Citation

  • Guncavdi, Oner & Ulengin, Burc, 2008. "Aggregate Imports and Expenditure Components in Turkey: Theoretical and Empirical Assessment," MPRA Paper 9622, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:9622
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    File URL: https://mpra.ub.uni-muenchen.de/9622/1/MPRA_paper_9622.pdf
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    References listed on IDEAS

    as
    1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    2. Mohsen Bahmani-Oskooee, 1998. "Cointegration Approach to Estimate the Long-Run Trade Elasticities in LDCs," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 89-96.
    3. Frimpong, Joseph Magnus & Oteng-Abayie, Eric Fosu, 2006. "Aggregate Import demand and Expenditure Components in Ghana:An Econometric Analysis," MPRA Paper 599, University Library of Munich, Germany, revised 15 Aug 0002.
    4. Asseery, A. & Peel, D. A., 1991. "Estimates of a traditional aggregate import demand model for five countries," Economics Letters, Elsevier, vol. 35(4), pages 435-439, April.
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    Citations

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    Cited by:

    1. George Marbuah, 2013. "Modelling import demand behaviour in Ghana: a re-examination," Economics Bulletin, AccessEcon, vol. 33(1), pages 482-493.
    2. Guncavdi, Oner & Ulengin, Burc, 2008. "Tradable and Nontradable Expenditure and Aggregate Demand for Import in an Emerging Market Economy," MPRA Paper 9631, University Library of Munich, Germany.

    More about this item

    Keywords

    Aggregate Imports; Linear Expenditure System; Turkey; Error-Correction Model;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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