U.S.-Turkey Commodity Trade and J-Curve Phenomenon: Evidence from 23 Industries

Abstract

This paper empirically explores the effects of real exchange rate on Turkey’s balance of trade at aggregate and dis-aggregate level. A dataset of 23 industries is analyzed over 1989-2017. Linear ARDL results confirm that there is no sign of J-curve phenomenon at aggregate level. However, linear ARDL results at dis-aggregate level support for J-curve phenomenon in Transportation, Textiles & Clothing and Ores & Metals industries. Furthermore, Turkish lira depreciation has favorable effect on most of the industries in the long-run. These results highlight to policymakers that depreciation policy could increase the exports against some trade partners and promote the domestic outputs. Whilst, one should carefully assess the adverse consequences of Turkish lira depreciation against trade benefits.