Turkish Exports Before
and After the 2001
Financial Crisis: A Panel
Semih Karacan1 and Özge Korkmaz2
Turkey was subjected to a number of financial shocks after the liberalisation
movements in the 1980s. The most devastating of them was the consecutive
political and financial crises in late 2000 and early 2001. The absence of political
stability and depreciated Turkish Lira devastated the markets. The Turkish
government immediately acted against the collapsed economic system and
introduced a radical Economic Stability Programme under the supervision
of Kemal Dervis¸. The programme has restructured the banking and financial
system and improved economic discipline. In this study, we aim to investigate
the impacts of the 2001 crisis and the structural changes on Turkish exports.
To this end, we estimate a one-way gravity model, using panel data belonging to
Turkish exports to 135 World Trade Organization (WTO) member countries,
over the period between 1981 and 2015. The augmented model controls for
the inter/intra-industry exports, competitiveness, trade agreements, trade unions
and additional demographics. We utilised Poisson pseudo-maximum-likelihood
(PPML) estimator to account for unobservable time-invariant effects, zero trade,
possible heteroscedasticity, and cross-correlation. The results reveals that Turkey
has become a free market economy after the liberalisation movements in the
early 1980s, and its exports are determined by the same indicators that affect
other similar economies; on the other hand, the 2001 crisis has an immediate
positive effect on exports through weak Turkish Lira, but this effect turns to
negative in the following year. In addition, we find that structural changes in the
economic system has a significant effect on exports and help to mitigate the
trade-distorting effects of the global financial crisis in 2008.
1 Department of Econometrics, Kütahya Dumlupinar University, Kütahya, Turkey.
2 Department of Management Information Systems, Malatya Turgut Özal University, Malatya, Turkey.
Semih Karacan, Department of Econometrics, Kütahya Dumlupinar University, Kütahya 43100, Turkey.
Foreign Trade Review
57(1) 27–40, 2022
© 2021 Indian Institute of
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