The Relationship between Foreign Trade and Economic Growth in Turkey: Causality Analysis

The relationship between foreign trade and economic growth is one of the most important research field in the literature. Because the direction and significance of this relationship may varies from country to country and time to time. In this context the aim of this study is to investigate the causal relationship between foreign trade and economic growth, whether it is valid for Turkey. The causal relationships were investigated between the quarterly data sets of the export unit value indices, import unit value indices and economic growth (GDP) for the period of 2002:Q1 - 2014:Q2 by using the VAR model. According to Granger causality test results, it was found bi-directional causality between import and economic growth in Turkey. These results, support import-led growth, growth-driven import hypotheses for the case of Turkey.