Real Effective Exchange Rate and Trade Balance Adjustment: The Case of Turkey / Plamen Iossifov, Xuan Fei.

Format:

Book

Government document

Author/Creator:

Iossifov, Plamen.

Contributor:

Fei, Xuan.

Series:

IMF Working Papers; Working Paper ; No. 2019/131

IMF Working Papers

Language:

English

Subjects (All):

Balance of trade--Turkey.

Balance of trade.

Foreign exchange rates.

Physical Description:

1 online resource (39 pages)

Edition:

First edition.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2019.

Summary:

There is an ongoing debate in the literature on whether global trade flows have become disconnected from the large real effective exchange rate movements in the wake of the global financial crisis. The question has important policy implications for the role of exchange rates in supporting growth and restoring external balance. In this paper, we use Turkey---a large and open emerging market economy that has experienced sizable swings of the real effective exchange rate---as a case study to test competing hypotheses. Our results lend support to the finding in existing cross-country studies that the real effective exchange rate remains an important determinant of trade flows. But, its effect is not symmetric in secular periods of appreciation and depreciation and is, oftentimes, dwarfed by the impact on trade flows of the income growth differential between trade partners.

Contents:

Cover

Contents

I. Introduction

II. Analytical Framework

III. First Look at the Data

IV. Regression Estimation

A. Regression Specification

1. ARDL Model

2. NARDL Model

B. Regression Results

1. Long-Run Export Elasticities

(a) Long-Run REER Elasticity of Exports

(b) Long-Run Income Elasticity and Speed of Adjustment of Exports

(c) Specification Tests

2. Long-Run Import Elasticities

(a) Long-Run Income Elasticity of Imports

(b) Long-Run Income Elasticity and Speed of Adjustment of Imports

V. Role of REER in Trade Balance Adjustment

VI. Summary of Findings

Appendices

A. Modeling Trade Flows Net of Energy and Gold

B. Data Sources

B.1. Construction of Trade-Weighted Indexes of Relative Prices and Foreign Income

B.2. Real Exports and Imports Series

Tables

1. Long-Run Trade Elasticities of Real Exports (Lira) in ARDL Model

2. Long-Run Trade Elasticities of Real Exports (Lira) with REER Inter- action Term in ARDL Model

3. Long-Run Trade Elasticities of Real Exports (Lira) in NARDL Model

4. Long-Run Trade Elasticities of Real Imports (USD) in ARDL Model

5. Long-Run Trade Elasticities of Real Imports (USD) with REER Intera- ction Term in ARDL Model

6. Long-Run Trade Elasticities of Real Imports (USD) in NARDL Model

A1. Long-Run Trade Elasticities of Real Exports Net of Energy and Gold (Lira) in ARDL Model

A2. Long-Run Trade Elasticities of Real Imports Net of Energy and Gold (USD) in ARDL Model

Figures

1. Turkey: REER and Nominal Current Account, 1998-2017

2. Turkey: Nominal Current Account and Real Trade Balance, 1998-2017

3. Turkey: Comparison of REER Estimates, 1998-2017

4. Turkey: REER and Real Trade Flows, 1998-2017

5. Recursive Wald Stability Test for Long-Run REER Elasticity of Real Exports in ARDL Model.

6. Rolling Estimation of Long-Run Export Trade Elasticities and Error Correction Coefficient in ARDL Model

7. Turkey: Annual Growth Rate of Long-Run Trend of REER, 1998-2017

8. Recursive Wald Stability Test for Long-Run REER Elasticity of Real Imports in ARDL Model

9. Rolling Estimation of Long-Run Import Trade Elasticities and Error Correction Coefficient in ARDL Model

10. Rolling Estimation of Marshall-Lerner Condition, 1998-2017

11. Rolling Estimation of Contribution of Domestic-Foreign Income Growth Differential to Real Trade Balance Adjustment.

Notes:

Description based on print version record.

ISBN:

9781498322829

1498322824

9781498322850

1498322859

OCLC:

1119632634