Analysis of the Effects of the Economic Crises and Pandemic on Foreign Trade in 1994-2022 with RALS-LM Structural Break Unit Root Test Method: The Case of Türkiye

Abstract

Türkiye commenced adopting export-led growth model by 1980. Via policies prioritizing the increase in export revenues, such as tax refunds, export credits, tax exemptions, and other subsidies, Türkiye targeted economic development by engaging in international trade and becoming a global economic agent. On the other hand, Türkiye gradually liberalized its financial markets starting in 1983 and completed the process of full liberalization of capital movements in 1989. However, adopting those liberal policies, Türkiye suffered many economic crises (1994, 2001, the 2008 global financial crises), paving the way to a sudden downturn in GDP, a decline in real income per capita, and employment. Also, the 2016 coup attempt, the 2018 Pastor Brunson crisis with the United States, and the COVID-19 pandemic in 2020, which created a severe global economic slowdown, negatively affected Türkiye’s economy. In this respect, within this paper, we aim to evaluate the impacts of those financial crises and the COVID-19 pandemic between the years 1994-2022 on Türkiye’s foreign trade and to find out if the effects of those crises on Türkiye’s foreign trade are temporary or permanent. For this reason, we utilized the RALS-LM Structural Break Unit Root Test Method. The results underline that the 2008 global financial crisis substantially affected Türkiye’s exports and imports. However, the results also underline that the effects of the 2008 global financial crisis on Türkiye’s foreign trade were temporary.