Turkey Foreign Trade Interaction with Cross Exchange Rates: Beneath the Currency Wars

Abstract

In recent years, due to global crisis and economic slowdown, major countries have been pushed to make economic actions. Currency wars have been debated and summoned again as before used in economic history to deal with economic slowdown by developed and emerging countries such as US, China, EU and Japan. Their actions on exchange rate policies would affect their bilateral trade balance as mentioned previous literature. Previous literatures have investigated bilateral country trade balance. This study, differs from previous ones, has investigated whether these countries’ cross exchange rates have an interaction with Turkey foreign trade. Data started from 2012:01 to 2019:09 which was one of milestone of currency wars. By help of ARDL econometric model, different level of stationary series have been used in same model to understand the long run and short run relationships among variables. It seems that, in long run EU, US and China economic actions on currency policies might be affected Turkey’s trade volume, externally. EUR/CNY currency has statistically insignificant results for two analyzed trade market.