Bilateral Trade Elasticities of Turkey

Abstract

This paper investigates the long-run bilateral trade elasticities of Turkey and its major \ntrading countries. In the long run, Turkish bilateral trade is inelastic (with varying sign). Thus, \nthe devaluation or revaluation of the Turkish Lira should be expected to have only a limited \nimpact on Turkey’s trade balance. On the other hand, Turkish trade is income elastic in the long \nrun but income inelastic in the short run. Nevertheless, the Marshall-Lerner condition is satisfied \nonly for Canada, South Korea and the US. Furthermore, switching to the euro has reduced \nTurkish imports from the EU members and emerging market crises tend to increase Turkish \nimports.

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