The home market effect in Turkey's trade

Abstract

The home market effect in Turkey's trade This paper investigates the validity of the home market effect in Turkey exports to its partners by estimating APDL gravity equations separately for each of the eight 1-digit SITC sections by pooling data for the sample of at most 42 countries for the period 1989-2007. Having performed the panel unit root and panel co integration tests, the pooled mean group techniques reveal that while no general conclusions are derived for the homogenous goods, the reverse home market effect is found for the differentiated goods. The reason of this reverse home market effect can be explained by first firms with foreign capital in Turkey largely import rather than export in the period investigated. Second, structurally, higher growth rates lead to higher imports rather than higher exports in Turkey and Turkey exports in manufacturing sectors largely depend on imports.