AN ANALYSIS OF SECTORAL EXPORT POTENTIAL OF TURKEY BY USING STRUCTURAL GRAVITY MODEL

Abstract

Purpose: The main purpose of this study is to analyze the sectoral export potential of Turkey with the Structural Gravity Model. It is aimed to find the average effects of a variable (such as GDP, real exchange rate, trade agreements) on Turkey's sectoral exports. It has been researched in which countries and sectors that Turkey exports below or above the potential. Method: The gravity model was used in this study to analyze Turkey's sectoral export potential. Findings: The aggregated results show that Turkey exports below its potential. The potential deficit of the agricultural sector in the 2010-2019 period is between 21-36 billion dollars. This corresponds to almost twice the volume of unused potential in Turkey's agricultural sector. On the other hand, the potential gap of the industrial sector in general is 5-31 billion dollars. The aforementioned values can be interpreted as the fact that Turkey has achieved some success in the industrial sector compared to the agricultural sector in terms of closing the potential gap in the historical process, but as of recent periods, both sectors have exported below the potential and policies that can approach the potential level are needed. Originality: Turkey's sectoral export potential was analyzed with the Structural Gravity Model, and the Gravity Model was first built for 179 countries and the period 2010-2019. Then, export potentials were estimated for the country pair at the sectoral level. Second, the average effects of a variable (such as GDP, real exchange rate, trade agreements) on Turkey's sectoral exports are examined. The study has a unique quality in terms of making a sectoral distinction and keeping the number of countries wide.