The Key Determinants of the Import and Policy Recommendations for Turkish Economy

Abstract

The main purpose of the article is to ascertain the key determinants of the import in Turkish economy, to analyze behavioral pattern of import demand and to make policy suggestions with regard to econometric results. For this purpose, the development of import and its characteristic features have been presented and the determinants of the import have been econometrically estimated by use of 2003.Q1-2014.Q4 period quarterly data. The explanatory variables determining the import are growth of export, real exchange rate returns and growth of GDP. Empirical evidences demonstrate that %1 rise in real exchange rate will lead 0.29% increase on import, %1 rise of export will lead 0.86% increase on import and %1 rise of real exchange rate will lead 3.14% increase on import.  These outcomes indicate that structural policies rather than exchange rate policies should be implemented in order to solve the chronic foreign trade deficit problems of Turkey.

Keywords: Import function, foreign trade deficit, variance decomposition