Testing the export-led growth hypothesis in Turkey: New evidence from time and frequency domain causality approaches

Abstract

This study investigates the validity of Turkey's export-led growth hypothesis (ELG) with the time domain and frequency domain causality methods using quarterly data for the 1998Q1–2021Q4 period. We also test whether government expenditure is an important channel within the framework of the ELG hypothesis. The time-domain causality results indicate that the feedback and import-led growth (ILG) hypotheses are valid. The frequency-domain causality results imply that the hypothesis of the growth-led export (GLE) is valid. Therefore, the time and frequency domain causality findings indicate that the ELG hypothesis is invalid. Turkey, which has followed an export-oriented industrialization strategy since 1980, is far from successful in this policy. Therefore, policymakers need to revise Turkey's foreign trade strategy.

KEYWORDS:

• Export-led growth
• growth-led export
• frequency domain causality
• time domain causality
• government expenditure

JEL classifications:

• E62
• H50
• F10

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 For more detailed information about the findings of the international literature, you can refer to Appendix 1.

2 Summarizing literature findings regarding the validity of the ELG hypothesis in Turkey are presented in Appendix 2.