Asymmetric effects of exchange rate volatility on Turkish-German commodity trade

Waqar Khalid, Irfan Civcir and Hüseyin Özdeşer

The Journal of International Trade & Economic Development, 2025, vol. 34, issue 5, 1004-1047

Abstract: This study investigates the asymmetric effects of exchange rate volatility on Turkish-German commodity trade using annual time-series data from 1980 to 2022. We analyze 90 industries exporting from Turkey to Germany and 114 industries importing from Germany to Turkey. The empirical results of the nonlinear ARDL model show that the volatility of the real lira-euro exchange rate had short-run asymmetric effects on trade flows for 60 (86) Turkish export (import) industries, which persisted for 46 (52) Turkish export (import) industries in the long-run. The industry-specific results show that an increase (a decrease) in lira-euro volatility increases Turkish exports (imports) to (from) Germany mostly for both small and large industries. The study suggests that export and import sectors that benefit from lira-euro volatility may consider expanding their production and trade activities, while sectors adversely affected by volatility may need to explore alternative strategies. This study highlights the importance of considering exchange rate volatility's asymmetric effects on trade between Turkey and Germany, emphasizing the varying implications across specific industries. The findings contribute valuable insights for policymakers and industry stakeholders in understanding how exchange rate fluctuations impact bilateral trade dynamics.

Date: 2025
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DOI: 10.1080/09638199.2024.2356780

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