SÜLEYMAN DEMIREL ÜNIVERSITESI VIZYONER DERGISI, vol.13, no.34, pp.551-565, 2022 (Peer-Reviewed Journal)
The study aims to determine the effect of depreciation on Turkey's imports and exports after the 2008 global crisis. For this purpose, the period 2008-Q1:2020-Q4 is analyzed. For real effective exchange rate, foreign trade, and inflation variables; Augmented Dickey-Fuller (ADF), Phillips Perron (PP) and Zivot-Andrews (ZA) for unit root tests and short-long term coefficient estimations; Vector Error Correction Model (VECM), Dynamic Least Squares Method (DOLS) and Fully Modified Ordinary Least Squares Method (FMOLS) methods are applied, respectively. Causality between variables is determined by Toda-Yamamoto causality analysis. The findings of the analysis conducted with two models are as follows: i) In the short run, the real effective exchange rate decreases imports. In the long run, both the real effective exchange rate and inflation reduce imports. ii) While REDK decreased exports in the short run, it increased inflation, and both variables decreased exports in the long run. iii) There is bidirectional causality between imports and inflation, and unidirectional causality from inflation to exports. Based on the findings, considering the negative effects of inflation and the real effective exchange rate on imports and exports, it wouldbe possible to eliminate the foreign trade and macroeconomic imbalances by reducing inflation and increasing production.