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    Turkish J- Curve: Trade Balance and Real Exchange Rate Relation
    (Selçuk Üniversitesi, 2019) Albayrak, Şerife Gamze; Korkmaz, Hüseyin Servet
    This study investigates the relationship between trade balance and real exchange rate relation using available data from 1992 :M1 to 2015 :M12 in Turkey. We take real effective exchange rate, industrial production indexes for both Turkey and five developed high income trade partner countries (Germany, France, Spain, Italy and the USA) proxies for real exchange rate and income effects and imports to exports rate as proxy for trade balance. At this research paper, We will look at the case for Turkey foreign trade with selected trade partners and exchange rate policy relations. Solely devaluation/depreciation of the currency does not bring success to elimination of trade deficit. At these studies investigating j-curve hypothesis and Marshall Lerner condition, different models and econometric techniques are used. With different perspectives, these papers found different results. Some of them found evidence supporting j-curve hypothesis, on the other hand some others did not found evidence from empirical data. Empirical research show that this result does not exist for every country and every time. At this research paper, We will look at the case for Turkey foreign trade with selected trade partners and exchange rate policy relations. Solely devaluation/depreciation of the currency does not bring success to elimination of trade deficit. In this context, cointegration tests are applied in order to search short-run and long-run elasticities of the trade balance and currency depreciation/devaluation. Empirical findings suggest that in the long run exchange rate and foreign trade balance have a relation. For the period. results of the cointegration tests show that devaluation/depreciation has long run impacts on trade dynamics and for a short time there exists j-curve pattern for Turkey. According to Granger causality tests, there are bidirectional relations between income level of Turkey with trade balance, real effective exchange rate and foreign income levels respectively. Also there exists unidirectional relations between trade balance with real effective exchange rate and foreign income respectively.