THE POWER OF TRADE COSTS OVER INTERNATIONAL TRADE: CAUSALITY ANALYSIS IN FREQUENCY DOMAIN FOR TURKEY
THE POWER OF TRADE COSTS OVER INTERNATIONAL TRADE: CAUSALITY ANALYSIS IN FREQUENCY DOMAIN FOR TURKEY

Summary/Abstract: The purpose of this paper is to find out the relation between foreign trade of Turkey and international trade costs (international commodity prices, transportation costs and exchange rate) by finding causality relations according to monthly time period. The data of our paper were taken from Central Bank of the Republic of Turkey (CBRT), United Nations Conference on Trade and Development (UNCTAD) and Bloomberg Markets database. The sample consists of 12 years in the period 2004:01 - 2015:12. We employ frequency domain Granger causality analysis that allows to short-run and long-run causality. The estimation of causality relation in frequency domain reveals that international trade costs could not be seen as causality indicator for international trade of Turkey except international commodity costs. Besides, causality relation between international commodity prices and import has been observed as of 4th month according to results. Therefore, the test results may draw new international trade strategies of Turkey.

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