The Determining Role of EU in Turkey's Trade Flows: A Gravity Model Approach

Ozgul Bilici (), Erkan Erdil () and Ibrahim Yetkiner ()
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Ozgul Bilici: Department of Economics, Izmir University of Economics

No 806, Working Papers from Izmir University of Economics

Abstract: This paper aims to determine the role of EU in Turkey’s trade flows by using the gravity model. It also aims to test whether the Customs Union (of EU) that Turkey entered in 1996 made a deviation in Turkey’s trade flows. Regional trade agreements on the one hand create new trade opportunities (trade creation effect). On the other hand, these agreements may also lead to diversion from free trade (trade diversion effect). Turkey’s Customs Union agreement without becoming a member of EU provides a laboratory to researchers to test whether the agreement was significant enough to cause any deviation in Turkey’s trade flow. In the first part of the study, we shortly provide some descriptive statistics related to Turkey’s trade flows with EU to see whether EU has gained any weight in the flows. In the second part, we first develop a gravity model that econometrically designates the determinants of Turkey’s trade flows via panel data approach. Next, we use this equation to test the importance of EU countries in Turkey’s trade flow and whether the flow has been subject to a deviation after the Customs Union agreement. Our findings indicate that EU countries have always been important in Turkey’s trade flow and that Customs Union has increased EU’s importance marginally in determining Turkey’s trade flow.

Keywords: Gravity model; Turkey; EU; Panel Data; Customs Union (search for similar items in EconPapers)
JEL-codes: F02 F11 F13 F14 F21 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2008-11
New Economics Papers: this item is included in nep-cwa, nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:izm:wpaper:0806

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