Revisiting the asymmetric effects of third-country exchange rate risk on Turkish–German industry trade

Waqar Khalid (), Irfan Civcir () and Hüseyin Özdeşer ()
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Waqar Khalid: National University of Sciences and Technology (NUST)
Irfan Civcir: Ankara University
Hüseyin Özdeşer: Near East University

SN Business & Economics, 2025, vol. 5, issue 9, 1-55

Abstract: Abstract The role of exchange rate volatility in shaping international trade has been extensively studied in the applied international economics literature; however, conventional trade models often assume symmetric effects, thereby neglecting the complexities introduced by third-country exchange rate fluctuations. This study addresses this gap by examining the asymmetric effects of third-country exchange rate risk, measured through lira–dollar volatility, on Turkish–German industrial trade. Using annual time series data from 1980 to 2022, we analyze 86 Turkish export industries and 114 import industries. Employing a nonlinear autoregressive distributed lag (NARDL) model, we find that asymmetric effects emerge in the short-run for 50 export and 68 import industries, while 39 export and 54 import industries exhibit long-term persistence of these effects. These findings highlight the need for industry-specific trade strategies, as some sectors benefit from lira–dollar volatility, whereas others face adverse consequences. By integrating third-country exchange rate risk into the bilateral trade analysis, this study offers a more comprehensive understanding of Turkish–German industrial trade dynamics. Furthermore, our findings provide novel policy insights, highlighting the importance of adaptive trade strategies and risk management measures in an increasingly interconnected global trade environment.

Keywords: Third-country risk; Asymmetric analysis; Turkish–German trade; Exchange rate volatility; Industry trade (search for similar items in EconPapers)
JEL-codes: F14 F31 F41 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s43546-025-00887-8

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