The impact of exchange rates on Turkish imports and exports

The Turkish lira has depreciated by 200% between 2012 and 2022. We investigate how exchange rates affect Turkish imports and exports. Nonlinear autoregressive distributed lag results indicate that appreciations during appreciation episodes increase imports and exports but exchange rate changes during depreciation periods frequently do not affect trade. These responses are inconsistent with the predictions of the imperfect substitutes model and the dominant currency pricing model. Rather, they are consistent with models where firms need to import inputs in order to export and where appreciations ease credit constraints that firms face when they must borrow in foreign currencies to purchase inputs.