Affiliation:
1. Beykent University, Turkey
2. Kto Karatay University, Turkey
Abstract
This chapter tries to determine whether there is a causal relationship between exchange rate and foreign trade. The study includes monthly data between February 2003 and December 2018 including dollar foreign exchange selling rate and inflation related real exchange rate for exchange rate, and export amount, import amount, export increase/decrease rate, and import increase. Increase/decrease rate is used for foreign trade among other variables, for a total of 6 variables. According to the obtained results of Engle-Granger cointegration analysis, there is a cointegration between variables in the long run. However, according to the results of the Toda-Yamamoto causality analysis, it was understood that there is no causality relationship between exchange rate and foreign trade.
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