IMPACT OF OIL AND NATURAL GAS PRICES ON THE TURKISH FOREIGN TRADE BALANCE: UNIT ROOT AND COINTEGRATION TESTS WITH STRUCTURAL BREAKS

Yilmaz Bayar () and Huseyin Karamelikli
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Yilmaz Bayar: Usak University

Romanian Economic Business Review, 2015, vol. 10, issue 3, 91-104

Abstract: Energy is one of the main inputs in the industrial production process. There have been remarkable increases in global production with the industrial revolution and globalization. The raising energy demand as a result of the increases in global production has been predominantly met by nonrenewable resources such as oil, natural gas and coal. Consequently we have experienced significant increases in energy prices especially as of oil shocks in 1970s. This study investigates the role of energy in the chronic foreign trade deficits of Turkey by using Hatemi-J (2008) cointegration test and Toda-Yamamoto (1995) causality test during the period 1997:01-2015:03. We found that there was long run relationship among the foreign trade deficit, oil and natural gas prices and real effective exchange rate and there was unidirectional causality from oil and natural gas prices to the foreign trade balance.

Keywords: Foreign trade balance; crude oil price; natural gas price; cointegration with structural breaks; causality test (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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