Export-led Growth Hypothesis: Turkey Application

This paper aims to investigate validity of “Export-led Growth Hypothesis” for Turkey using quarterly data in period from 2003:Q1 to 2015:Q1. Hypothesis argues that there is causality relationship from real export to real Gross Domestic Product (GDP). Johansen cointegration test, Gregory-Hansen cointegration test, Toda-Yamamoto causality test, Fully Modified Ordinary Least Squares (FMOLS), Canonical cointegrating regression (CCR) and Dynamic ordinary least squares (DOLS) methods were used in this study. Findings can be summarized as follows: a) According to Johansen cointegration test there is no relationship among variables in the long-run whereas Gregory-Hansen cointegration test has determined relationship in the long-run; b) According to Toda-Yamamoto causality test there is bidirectional causality between real export and real GDP. This finding proves the validity of “Export-led Growth Hypothesis” for Turkey; c) According to FMOLS, CCR, DOLS methods a 1% increase in the real export increases the real GDP by 1.5195%, 1.5552%, 1.3171% respectively in the long-run. These methods prove the validity of “Export-led Growth Hypothesis” for Turkey.