The Real Effective Exchange Rate and Industrial Employment: The Turkish Case

Abstract

This study investigates the relationship between industrial employment and producer price index-based real effective exchange rate, over the period 2009M01- 2019M10, by employing the autoregressive distributed lag cointegration procedure, for the Turkish economy. The empirical findings support the existence of a positive relationship between the appreciation of the producer price index-based real effective exchange rate and an increase in industrial employment. Accordingly, a 1% appreciation of the producer price index-based real effective exchange rate leads to a 0.092% increase in industrial employment. This finding supports the dominance of the “imported input” channel over the other transmission channels for Turkey at the industry level.