Turkey's export Dynamics: a Simultaneous-Equation Model Analysis

Turkey is one of the countries where a major portion of exports is critically dependent on foreign manufacturing on its land which in turn is dependent on imports of intermediate goods. Intermediate goods imports make 70% of Turkey's total imports. This critical feature of the economy, which causes endogeneity in regression models, led us to use simultaneous-equations model in analyzing its exports and imports. We covered the period from 2003 to the end of 2013 which is economically more stable. While imported intermediate goods play a critical role in exports, we find that exports are more sensitive to real exchange rates than imports.