An Analysis on the Domestic Sales and Exports: A Dynamic Model for the Turkish Manufacturing Firms

Selcuk Gul

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This study examines the relation between real domestic sales and real exports for Turkish manufacturing firms. Dynamic panel data estimations based on firm level data for the period 2004 to 2014 suggest that the two variables are substitutes. Holding other factors constant, we estimate that a 10 percent decline in real domestic sales increases the real exports by about 2.6 percent, on average. However, this correlation differs among manufacturing sub-sectors, which are defined according to 2-digit NACE classification. Results indicate that substitutability between domestic and foreign sales is stronger for export-oriented, low-leveraged and younger firms. In addition, we observe that the degree of substitution between real domestic sales and exports strengthens significantly when the domestic demand conditions are weak. This shows that exporter firms in manufacturing industry have the elasticity to shift from domestic to international markets as a response to domestic demand shocks.

Keywords: Domestic sales; Exports; Domestic demand; Dynamic panel data (search for similar items in EconPapers)
JEL-codes: C23 D22 F14 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-int and nep-sbm
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1902

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