A Policy Dilemma in the Context of Turkey’s Sectoral Export Competitiveness: The Role of Exchange Rates and Labour Costs
A Policy Dilemma in the Context of Turkey’s Sectoral Export Competitiveness: The Role of Exchange Rates and Labour Costs

Summary/Abstract: Production in Turkey has a high dependence on imported inputs. Therefore, the policy aiming at increasing exports through a depreciated national currency leads to different results depending on the degree of dependence on imported inputs. This study econometrically analyzes increases in exports of manufacturing and service industries with different levels of imported input dependence. The analysis findings indicate that national currency depreciation leads to competitive effects in the manufacturing industry, but not in the service sector. The effect of labour costs is much lower in the manufacturing industry than in services. A significant negative impact of the unit value index of crude material imports on the sectoral competitiveness of the manufacturing industry was found. Changes in import prices seem to have no significant impact on service exports.

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