PROBLEMS FACED BY INTERNATIONAL FIRMS IN DEVELOPING COUNTRIES DUE TO EXCHANGE RATE FLUCTUATIONS: A CRITICAL STUDY OF INTERNATIONAL FIRMS IN TURKEY

Year 2017, Volume: 6 Issue: 1, 8 - 16, 30.03.2017

Yaw Frimpong Ofori Atta

https://doi.org/10.17261/Pressacademia.2017.381

Abstract

Purpose- Exchange rate fluctuations and
instability have rekindled interest of researchers in the subject of
relationship between international trade and exchange rate. This study focused
on the impact of exchange rate on international trade churning out various
problems faced by international firms in developing countries specifically in
Turkey.  

Methodology- A bi-variate framework was
employed in the study for exchange rate and foreign trade. The study used the
VAR approach and VAR granger causality in the identification of long run
co-integration and causality. Data used was between 1975 and 2014.

Findings- It was found that there was no
directional granger causality between exchange rate and foreign trade in
Turkey. However, diverse dynamic linkages were found between exchange rate and
foreign trade in Turkey using Impulse Response Functions.

Conclusion- The study concluded that,
international firms in Turkey are not singularly motivated by exchange rate
increase or decrease to engage in international trade. 

Keywords

Exchange rate, foreign trade, international firms, VAR, impulse response function

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