The Dynamic Effect of Exchange-Rate Volatility on Turkish Exports: Parsimonious Error-Correction Model Approach

Erdal Demirhan () and Banu Demirhan ()

Panoeconomicus, 2015, vol. 62, issue 4, 429-451

Abstract: This paper aims to investigate the effect of exchange-rate stability on real export volume in Turkey, using monthly data for the period February 2001 to January 2010. The Johansen multivariate cointegration method and the parsimonious error-correction model are applied to determine long-run and short-run relationships between real export volume and its determinants. In this study, the conditional variance of the GARCH (1, 1) model is taken as a proxy for exchange-rate stability, and generalized impulse-response functions and variance-decomposition analyses are applied to analyze the dynamic effects of variables on real export volume. The empirical findings suggest that exchange-rate stability has a significant positive effect on real export volume, both in the short and the long run. Key words: Exchange-rate volatility, Export function, Parsimonious error-correction model, Cointegration, Turkey.JEL: F10, F31.

Keywords: Exchange-rate volatility; Export function; Parsimonious error-correction mode; Cointegration; Turkey (search for similar items in EconPapers)
Date: 2015
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