Asymmetric cointegration with threshold adjustment model of exchange rates and the trade balance in Turkey |
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Authors: | Dincer Dedeoglu Kaan Ogut |
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Institution: | Department of Economics, Bahcesehir University, Istanbul, Turkey |
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Abstract: | This paper aims to investigate the long-run equilibrium relationship between the trade balance and exchange rates in Turkey using the asymmetric error correction model with threshold cointegration. The results provide new evidence for the asymmetric long-run relationship between the trade balance and exchange rates. Besides, deviations from the long-run equilibrium due to a relative increase in real exchange rates have a lower speed of adjustment in comparison to the deviations caused by a relative decrease in real exchange rates. |
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Keywords: | Exchange rate trade balance threshold autoregression asymmetric adjustment causality |
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