ASYMMETRIC PASS-ON EFFECT OF REAL CURRENCY ON FOREIGN TRADE IN TURKISH ECONOMY: AN ANALYSIS OF THE MARSHALL-LERNER CONDITION

One of the fundamental reasons of current deficit problem of Turkish economy is regarded as foreign trade deficit. Accurate demonstration of the effects of nominal currency increases or devaluations on foreign trade is crucial in terms of closure of these deficits in determination of practical policy set. Hence, in the present study, it was aimed to reveal whether the Marshall-Lerner Condition was satisfied for the Turkish economy. To that end, the Non-Linear Autoregressive Distributed Lag (NARDL) method was employed for the analysis covering the period of 1980-2022. Our results suggested for the concerned period that the Marshall-Lerner Condition was not satisfied for the Turkish economy in terms of both short and long term. Accordingly, our suggestion was to reduce Turkiye’s foreign trade deficit through different monetary and financial policy practices other than the currency rate-focused strategies.