Determinants of Export Flows from Turkey to BRICS Countries: The Findings from the Augmented-Gravity Model Approach

Abstract

This study aims to identify the main determinants of export flows from Turkey to BRICS countries using annual panel data for the 1993-2016 period. The Augmented-Gravity model determined for this purpose was estimated using the Haussman-Taylor method. According to the results, it is obvious that the national incomes and trade openness levels of BRICS countries and total energy production and research and development expenditures of Turkey are factors that promote Turkish exports. The bilateral real exchange rate appears to be positively associated with export flows. Also, the existence of a common border is a factor that encourages Turkish exports. Given the findings of the study, the most efficient policy to increase Turkish exports to BRICS countries is to enhance the investment in research and development which causes technological progress. It is also understood that policy implementations aimed the increasing energy production will promote the export flows. The economic size and trade openness of the BRICS countries are progressed independently from Turkey. At this point, economic growth and liberal trade policies in BRICS countries will increase the exports of Turkey. The positive relationship between bilateral real exchange rate and export flows indicates that Turkey lacks the price competitiveness. This result is likely due to the high import content of export products in Turkey. Hence, Turkey should give priority to other factors (such as branding, producing according to international standards, product diversification) rather than price competition to increase the exports to BRICS countries.