A Panel Data Analysis of Turkish Export Market: a Gravity Model Approach

For nearly half a century, changing economic conditions have also changed the determinants of foreign trade, and different factors have begun to be evaluated. Economic globalization, more widely discussed today, defines a framework in which controls on goods are reduced, capital is in free circulation, labor mobility is present, international entrepreneurship is spread, and various integration unions such as Free Trade Zones, Special Economic Zones, and economic and monetary unions are increasing. Factors such as growth, product differentiation, distance, exchange rates, and supply chain elements have become important, apart from supply and demand differences between countries. In such a context, understanding the mechanisms and limitations of international trade and the factors affecting the volume and direction of trade flows is an important agenda item for conducting economic policy. One of the most popular econometric models that aims to determine these factors and can be derived from many trade theories is known as the gravity model of international trade. The aim of this article is to perform an econometric analysis of the effects of the main driving forces on Turkey’s export performance with its trading partners using the gravity model. In this context, the study was conducted with panel data of the top 21 countries in Turkey’s exports in seven periods determined between 2007-2023. The periods evaluated were determined as the years in which the Logistics Performance Index, one of the important measures published by the World Bank and used to determine the challenges and opportunities faced by countries in their international trade and logistics activities, was published. Some countries that are at the forefront and have high trade with Turkey but whose periodic variable data could not be accessed were excluded from the analysis. Therefore, although 25 countries were examined, 21 of them were used in the analysis. Nowadays, researchers consider expanding the scope of the model by including logistics performance data in the analysis to make it more qualified to measure cross-border trade performances of countries using the gravity model with statistical methods. Total export performance with the specified countries is considered as the dependent variable in our gravity model. Independent variables include economic growth, national income differences, exchange rates, logistics performance index of partner countries and distances of countries’ capitals to Ankara, the capital of Turkey. The econometric findings obtained as a result of this research confirm that the model will produce results consistent with the theoretical expectations of the Gravity model. While the increase in distance between countries negatively affects export income, the increase in total income of countries positively affects trade. Additionally, it was seen that logistics performance was also a determining factor in exports. The conclusion section provides a general evaluation of the findings and various policy recommendations to increase Turkey’s trade volume.