Financial Stress and the Trade Balance in Turkey: Empirical Evidence from Credit and Real Exchange Rate Channels
Öz
In this study, the effects of fluctuations and crises in financial markets on the trade balance were analyzed using monthly data from the period 2000–2025. In the model established, the trade balance was treated as the dependent variable, while the Financial Pressure (Stress) Index was used as the primary independent variable to represent stress and fragility in financial markets. In order to explain the mechanisms through which financial stress affects the trade balance, domestic credit and the real effective exchange rate index were included in the model as transmission channels. Empirical findings reveal the existence of a stable equilibrium relationship between the variables in the long term, according to the Maki cointegration test, which allows for multiple structural breaks. The cointegration coefficients obtained show that global uncertainties and financial crises negatively affect the trade balance under structural breaks and cause fluctuations in trade performance. However, the VAR-based impulse-response functions indicate that the impact of external shocks on financial stress and other variables dissipates in the short term, within approximately 2–3 months. On the other hand, Vector Error Correction Model (VECM) results estimated based on the VAR model show that financial stress, domestic credit, and exchange rate channels have significant long-term effects on the trade balance. These findings reveal that the trade balance is sensitive not only to short-term shocks but also to the overall health and stability of the financial system. In this context, it is concluded that multidimensional and comprehensive policy measures are needed to limit the negative effects of global financial uncertainty and crises on foreign trade, which strengthen financial stability, direct the credit mechanism in favor of production and exports, and aim to reduce exchange rate volatility.
Anahtar Kelimeler
Financial Stress, Trade Balance, Credit Channel, Real Effective Exchange Rate, Time Series Econometrics
Kaynakça
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