Abstract
This paper examines the effects of exchange rate fluctuations on disaggregated data comprising 21 exporting sectors (BEC classification) in Turkey. Building on a theoretical model that decomposes movements in the exchange rate into anticipated and unanticipated components, the empirical investigation traces the effects through demand and supply channels. Anticipated exchange rate appreciation, in line with movements in underlying fundamentals, has significant adverse effects, contracting export growth across many sectors. Random fluctuations in the exchange rate, deviations around steady-state equilibrium, have asymmetric effects on sectoral export growth. The evidence indicates increased contraction of export demand to currency appreciation over time. In contrast, the effect of depreciation in stimulating export growth has lost momentum over time. While exchange rate fluctuations had a positive net effect on export growth before 2003, the net effect is negative for the post-2002 period. The implications are anticipated movement in the exchange rate guides export plans, signaling the importance of managing fundamentals to anchor rational forecasts. Moreover, less variability of the exchange rate is likely to improve sectoral export growth in Turkey over time.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: The Journal of International Trade & Economic Development
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
