Turkish Economy Research Articles

Bilateral J-Curve Between Türkiye and Its Major Non-EU Trading Partners: Evidence from Both Linear and Non-Linear Approach

This research analysed the bilateral J-curve phenomenon in the Turkish economy. For this purpose, we applied both the linear and non-linear Autoregressive Distributed Lag (NARDL) co-integration methods, in addition to the asymmetric Toda-Yamamoto causality test, to examine whether the impact of Turkish lira appreciations differs from that of lira depreciation. The findings from the linear model indicate statistically significant coefficients for the long term, and J-curve effects were observed in the case of two countries: Russia and the UAE. This suggests that when the Turkish lira depreciates, it positively affects Turkey's trade balance with these partners; however, lira appreciations have a negative impact. In contrast, the non-linear model provides more evidence, with the results revealing that asymmetry cannot be ignored, as the positive and negative variables exhibit differences in signs, magnitudes, and levels of significance. We found the J-curve effect for only three countries (India, USA, and UAE) out of seven partners in this model. Third, the lira evaluation between the short and long run affected the external balance. Furthermore, the long-run error correction mechanisms converge to steady-state equilibrium faster. Lastly, there is a unidirectional or bilateral linkage between the FX rate and the external deficit for these four partners. Therefore, exchange rate policies are a determinant that should be considered in relationships with certain trading partners.

Developments in the Turkish Economy During the Period Between 2000-2010 in the Light of the Free-market Economy Policies of the 1980s and 1990s

Developments in the Turkish Economy During the Period Between 2000-2010 in the Light of the Free-market Economy Policies of the 1980s and 1990s

THE ASYMMETRİC EFFECT OF PRODUCER PRİCES ON CONSUMER PRİCES İN TURKİSH ECONOMY

The aim of the study is to evaluate the asymmetric impacts of producer price on consumer prices and cointegration relationship between two price indexes for Turkish economy from 2003.M1 to 2022.M12. Another aim is to analyze the causality between Producer Price Index (PPI) and Consumer Prıce Index (CPI). The Autoregressive Distributed Lag Model (ARDL) and Non-Linear Autoregressive Distributed Lag Model (NARDL) is estimated to determine relation between PPI and CPI and asymmetric effects of PPI on CPI. The causality relation is examined using Toda-Yamamoto Granger Causality method. According to the results, there is a cointegration relation between CPI and PPI. The ARDL model implies that PPI has a positive impact on CPI both in the short time period and in the long time period. The NARDL model indicates that although positive shocks to the PPI have positive effects on CPI, negative shocks do not have statistically significant effect on CPI. In addition to these results, Toda-Yamamoto Granger Causality method indicates that a bidirectional causality is found between two price indexes.

Sentiment-Driven Exchange Rate Forecasting: Integrating Twitter Analysis with Economic Indicators

Abstract This study focuses on predicting the USD/TL exchange rate by integrating sentiment analysis from Twitter with traditional economic indicators. With the dynamic nature of global finance, accurate exchange rate forecasting is crucial for financial planning and risk management. While economic indicators have traditionally been used for this purpose, the increasing influence of public sentiment, particularly on digital platforms like Twitter, has prompted the exploration of sentiment analysis as a complementary tool. Our research aims to evaluate the effectiveness of combining sentiment analysis with economic indicators in predicting the USD/TL exchange rate. We employ machine learning techniques, including LSTM Neural Network, xgboost, and RNN, to analyze Twitter data containing keywords related to the Turkish economy alongside TL/USD exchange rate data. Our findings demonstrate that integrating sentiment analysis from Twitter enhances the predictive accuracy of exchange rate movements. This study contributes to the evolving landscape of financial forecasting by highlighting the significance of sentiment analysis in exchange rate prediction and providing insights into its potential applications in financial decision-making processes. JEL classification numbers: C53, F31, E60. Keywords: Twitter narratives, LSTM, XGBoost, RNN, USD/TL FX rate, Narrative economics.

Structural Shift in Türkiye-East Asia Economic Relations: The Demise of Japan and the Rise of China and South Korea

Türkiye’s economic relations with East Asia have gone through a significant structural shift over the last two decades. Previously, Japan dominated Türkiye’s trade with East Asia and foreign direct investment inflows from East Asia to Türkiye. However, recently both South Korea and China have surpassed Japan as major trading partners of Türkiye in East Asia and caught up with Japan in foreign investments in Türkiye. The dependence of the Turkish economy on intermediate inputs from China, in particular, rose remarkably. The shift from Japan toward South Korea, and more significantly, to China in Türkiye’s economic relations with East Asia reflects the changing division of labor in the East Asian region and the rise of China as a manufacturing superpower. In this analysis, we discuss the extent of this shift in Türkiye’s relations in light of the ongoing talks of a proposed free trade agreement between Türkiye and Japan, the changing global trade environment due to the decoupling from China, and the increasing fragmentation of the world economy.

The Turkish Economy in the Period between 1990 and 2000 in the Light of the Open Economy Policies of the 1980s Developments

The Turkish Economy in the Period between 1990 and 2000 in the Light of the Open Economy Policies of the 1980s Developments

A Multi-Criteria Strategic Evaluation Model to Determine the Suitability of Newly Rising Engineering Departments in Turkish Universities Based on the Data from the Year 2009 to 2020 Using the Econophysics Perspective

In the recent decade, engineering and technology have been developed rapidly, and new requirements are rising for engineering education. So, new and more focused departments are rising in the engineering faculty. The Turkish economy has been developed, and it is necessary to develop new technologies in industry based on the new investments. The scientific models are required to decide which engineering departments are necessary based on the socio-economic development of the economy. For this aim, we present a strategic analysis of which department can be established to meet the requirements in Turkey in light of the latest developments in the world. In the analysis stage, we listed engineering departments in the world universities and compared them with Turkish universities. We determined the selection criteria for the alternative departments, following these analyses and their related data collected from the Turkish Statistical Institute’s website. We used the new impulse and momentum principle-based weight assignment procedure integrated Technique for Order Preferences by Similarity to the Ideal Solution (IMP-TOPSIS) method to rank alternative departments using different scenarios. We concluded that Artificial Intelligence Engineering is the most suitable alternative. In addition, Aerospace Engineering has the second importance, and Materials Science and Nanotechnology Engineering have the third importance, according to the obtained results.

Borsa Istanbul Sectoral Connectedness Analysis

This study examines the volatility connectedness among banks, industrials, and services subindices of Borsa Istanbul using the Diebold-Yılmaz connectedness index methodology. The findings indicate that the banks index typically acts as a net receiver of connectedness from industrials and services indices. If the banks index is considered a proxy for the financial side of the Turkish economy while the other two represent the real side, this result aligns with earlier observations on the connectedness between the real and financial sides of economies. Specifically, it suggests that when a proxy for the real side incorporates financial variables, the real side tends to be a net source of connectedness most of the time. As shock propagators, industrials play a dominant role, and the banks index often moves in the opposite direction to the other two sectors.
 Key Words: Real and Financial Sectors, Financial Connectedness, Volatility, Borsa Istanbul.
 JEL Classification: C32, E44, G10.

Telework as a dynamic capability of firms: A qualitative research and narratives

Unexpected and negative factors such as pandemics, crises, etc. have a profound effect on business environment and entail a paradigm shift in the classical concept of work schedule. The paper aims to explore the phenomenon of telework as a dynamic capability of firms to ensure business continuity in the face of all kinds of unpredictable events and delves into the factors behind telework applications that contribute to increasing the resilience of SMEs to chaotic business shifts. Dynamic capabilities theory constitutes the methodological basis of the study. For the purpose of the research, the qualitative method was used, which has a detailed and exploratory approach with inductive questions and enables a holistic picture of the phenomenon under investigation to be revealed. The multi-site case study design was preferred, and the data collected were analysed using content analysis. In July–August 2022, 13 semi-structured interviews were conducted with the owners, top and mid-level managers of SMEs operating in the service sector in Turkey. MAXQDA 2020 programme was used to analyse the data obtained. As a result of the research, the structure of the telework theme consisting of three dimensions (technological infrastructure, culture, and work attributes) and ten sub-dimensions (working order, trust, implementation history, business strategy, etc.) was discovered. For telework to be carried out healthily, firms should establish working order, work to be done, time spent by employees in front of the computer, etc., be more flexible and receptive to changes in work practices, create an appropriate culture and establish manager-employee trust.

Economic voting in the 2023 Turkish general election

ABSTRACT The Turkish economy presented a complicated picture ahead of the 2023 election, with significant currency depreciation and soaring inflation yet robust growth and stable employment levels. How did voters’ economic perceptions shape election results in such a context? Drawing on Turkish Election Study surveys, this study reaches two main conclusions. First, while the average evaluation of the economy in the electorate was quite poor, there is a sharp divergence across incumbent supporters and others: The incumbent Justice and Development Party (Adalet ve Kalkınma Partisi – AKP) supporters’ evaluations have changed little since the previous election in 2018, yet those of other voters have deteriorated significantly. Second, the opposition seems to have failed in convincing large parts of the electorate that they would manage the economy better than Erdoğan. Overall, economic voting appears to have worked as expected, and the unwavering economic evaluations of likely AKP voters and the perceived incompetence of the opposition seem to have helped Erdoğan to win another term.

Investigating the Asymmetric Effects of Geopolitical Risks on Portfolio Investments in Turkish Economy

This study aims to analyze the impact of geopolitical risks faced by the Turkish economy on international portfolio investments. Since it is thought that these risks may have asymmetric effects, the study utilizes the NARDL methodology. Based on this situation, the BDS linearity test was employed to assess the variables, revealing the presence of a non-linear structure in the time series. As a result of the NARDL analysis, it is observed that the long-run and short-run effects of geopolitical risks differ, and the asymmetric relationship, which is moderate in the short-run, turns into a symmetric structure in the long-run. In this framework, it is concluded that international portfolio investors increase their investments to take advantage of return opportunities in the short run in the face of increased geopolitical risk, but prefer safe economies in the long run. The Turkish economy, in order to reassure investors, is of great importance to increase transparency in the fields of economy, justice, and governance, to ensure and strengthen the independence of institutions, and especially to put economic policies on a rational basis.

The Decline of Turkey as a Subimperialist Power: Political Economy of the Turkish Foreign Policy under AKP Rule

ABSTRACT Turkish foreign policy during the AKP era has been under academic scrutiny for a long time, but the outcome of the analyses has often varied considerably. Yet most of this research agrees upon one thing, which is that Turkey under the AKP has become more active and more influential, both in its region and in the international arena. While accepting Turkey’s continuing relevancy, this paper argues that, although Turkey still could be considered as a regional power, its capacity for influencing regional and global politics had been eroded considerably in the last decade. At first glance, Turkey’s recent U-turns and failures in foreign policy under Erdoğan’s personalized style could be identified as the main reason for this erosion. However, building on Ruy Mauro Marini’s conceptualization of subimperialism, this paper contends that it is actually conditioned by the neoliberal restructuring of the Turkish economy in the last four decades, which has transformed Turkey’s economic structure in a very profound manner.

The link between electricity consumption and stock market during the pandemic in Türkiye: a novel high-frequency approach

This article examines the relationship between electricity consumption and the stock market in the Turkish economy during the COVID-19 pandemic. A novel high-frequency model is used, incorporating the hourly energy consumption and Borsa Istanbul (BIST) National stock market index variables. To determine the effect of electricity consumption on the stock market index and vice versa, a high-frequency VAR-based spillover approach, time-varying Granger causality, and time-varying Bayesian VAR analysis are employed. The findings reveal a positive and weak relationship between electricity consumption and the stock market but it has a time-varying nature in an emerging market context in the post-COVID-19 period in the Turkish economy.

Döviz Kurunun BYF’ler Üzerindeki Etkileri: BİST’ten Kanıtlar

This study better investigates the possible relationship between exchange rates and ETF prices in the BIST to understand ETF investors' behaviour in the Turkish economy. Conventional and Fourier-based co-integration and causality analysis methods were employed to test models. According to findings, although the exchange rate has no direct effect on ETF prices in Türkiye, it is effective on ETF prices indirectly via the risk and share of foreign investors. The originality of the study lies in models built with additional control variables. In doing so, we measure the direct and indirect effects of the exchange rate on the Turkish economy.

Linear and nonlinear analysis for testing the hysteresis hypothesis in Türkiye

Unemployment is an important socioeconomic problem. Economic shocks especially affect the economies of developing countries negatively. The hysteresis hypothesis expresses the view that temporary shocks can have a permanent effect on unemployment rates. The hysteresis hypothesis can be considered as an objection to the natural rate hypothesis. From a unit root perspective, if the series contain a unit root, hysteresis hypothesis is valid. If not, hysteresis hypothesis is not valid. This study aims to test the hysteresis hypothesis by using data covering the period of 2014M01-2023M07 in the Turkish economy. In the study, general unemployment and youth unemployment rates have been discussed. Some of the most commonly used linear and nonlinear unit root tests in applied studies have been included in the study in order to make comparisons. By detecting that the series are nonstationary according to linear and nonlinear unit root tests, it can be inferred that hysteresis hypothesis is valid in Türkiye. This shows that the effects of shocks are permanent. Effective policies against unemployment need to be developed.

Kriz Dönemlerinde Sermaye Kaçışının Belirleyicileri: Türkiye'den Kanıtlar

Turkey, among a number of developing countries, has been exposed to capital flight in many periods of its economic history due to both global and domestic dynamics. Our study attempts to investigate the macroeconomic determinants of capital flight, which has occurred since the 2000s and whose emergence depends on different factors, with the VAR method for the Turkish economy. Although the analysis period is for the quarter period 2000q1-2020q4, the key macroeconomic determinants of capital flight are investigated by considering various sub-periods. The macroeconomic determinants of capital flight are investigated by taking into account the sub-periods indicating financial stress periods, which is the differentiating aspect of the study from the related literature. The outcomes indicate that there is a positive association between capital flight and external debt for the whole period, but an adverse relationship between capital flight and current account deficit and depreciation of the Turkish lira. Also, a positive association was indicated between capital flight and inflation rate. The empirical results show that there is ‎variation in the significant effect of the determining factors of the capital flight among the three examined periods. These results are important for determining the policy designs and key issues regarding Turkey's process of combating capital flight. Ensuring financial stability, building investor confidence, closely monitoring external borrowing dynamics, and implementing policies that prioritize the fight against inflation are integral parts of this process. Since they are also among the fundamental elements of macroeconomic stability, every step to be taken in this regard is of great importance.

Bilginin Türkiye Ekonomisinin Büyümesi Üzerindeki Rolü, 1960-2019

In recent decades, there has been a notable shift in the global economy towards a knowledge-based economic framework. This transformation has been influenced by many key factors, sometimes referred to as pillars of knowledge. These pillars encompass human capital, research and development (R&D), information and communication technologies (ICTs), and foreign trade. This study examines the influence of knowledge on the economic growth performance of Türkiye from 1960 to 2019. It employs a production function framework and utilizes the Autoregressive Distributed Lag (ARDL) technique. This study additionally presents a knowledge index as a means to assess several dimensions of knowledge in a unified form. The empirical results indicate that higher level of knowledge has had a positive impact on the growth rate of Turkish economy over the sample period.

Evaluation of personal protective equipment to protect health and safety in pesticide use

IntroductionAgriculture emerges as one of the most dangerous industries in the world, considering injury and illness rates. After the service sector in Turkey, the next large-scale sector is the agricultural sector, which constitutes 20% of the general employment. The exposure of farmers to pesticides, used to increase the quality and productivity of agricultural products, causes health risks via the mouth, respiration, skin, and eyes. Pesticide use in Turkey is increasing; the annual average increase is estimated at 1.2%. Exposure to pesticides can be reduced by wearing personal protective equipment to protect against health and safety hazards.ObjectiveThis study aimed to determine the importance of personal protective equipment using the multi-criteria decision-making method to prevent the risk of injury and disease resulting from pesticide use.Materials and methodsThe Analytical Hierarchy Process (AHP) method was used to find the weights of the criteria determined by expert opinion and a literature review. The Preference Ranking Organization Method for Enrichment Evaluation (PROMETHEE) was used to rank personal protective equipment.ResultsPersonal protective equipment includes masks, gloves, overalls, safety shoes, glasses, and hats. The use of multi-criteria decision-making methods in health and safety in the agricultural sector will contribute to the literature.ConclusionEmphasizing the use of personal protective equipment, especially when using pesticides, will increase the rate of use of protective measures.

Trade uncertainty and investments in an emerging country: a Fourier VAR approach

PurposeThis investigation aims to determine the effect of trade uncertainty on domestic investment (DI) and foreign direct investment (FDI) for the Turkish economy from the first quarter of 2005 to the first quarter of 2020.Design/methodology/approachThe authors adopt the vector autoregression (VAR) model augmented with Fourier terms. Using this methodology, the authors obtain the empirical results of the impulse-response functions and the variance decomposition analysis.FindingsThe empirical results demonstrate that a shock to trade uncertainty has a slight negative impact on DI for up to approximately 1.5 years, whereas its impact on FDI is negative but long-lasting. Moreover, the contribution of trade uncertainty to FDI is relatively higher than to DI in the error variance decomposition for the investigated period. These empirical results can be beneficial for shaping the Turkish authorities' trade policies in the following periods.Research limitations/implicationsThese findings have implications within the macroeconomic setting. Government authorities can provide tax exemptions for specified sectors and debureaucratize investment processes for both domestic and foreign entrepreneurs. Additionally, institutional quality and property rights should be protected strictly and developed gradually.Originality/valueThis study is the first to examine the impact of world trade uncertainty on Türkiye’s DI and FDI. Because trade uncertainty might act as fixed costs, this creates the option value of waiting and seeing the market, and firms hesitate to incur investment.

Fragility or habitualized corporate behavior? Corporate and macroeconomic determinants of debt dollarization: Evidence from Turkey

AbstractThis study examines the firm‐level and macroeconomic‐level determinants of debt dollarization, which is a critical vulnerability for a key emerging market: Turkey. The study examines the firm‐level and macroeconomic determinants of debt dollarization between 2005 and 2017 using the generalized method of moments and the panel vector autoregressive method, both of which are highly innovative. The results show that manufacturing firms tend to dollarize debt, while macroeconomic variables such as the real exchange rate, inflation, and credit expansion significantly affect debt dollarization. Moreover, debt dollarization was found to be a habit of manufacturing firms in the Turkish economy.