The Effect of Turkey's Free Trade Agreements (FTAs) on Its External Trade: Counterfactual Impact Analysis

Anahtar Kelimeler:

Free trade agreements (FTAs), Turkey, ex-post analysis, counterfactual impact analysis

The Effect of Turkey's Free Trade Agreements (FTAs) on Its External Trade: Counterfactual Impact Analysis

The study aims to estimate the impact of Turkey's FTAs on its average external trade level by three novel approaches, which are the fixed effects counterfactual estimator (FEct), interactive fixed effect counterfactual (IFEct) estimator, and matrix completion (MC) method introduced by Liu et al (2022). The results show that while Turkey's FTAs have a positive impact on Turkey's exports to the economies that Turkey has FTAs, we do not find any significant effect on its imports on average. The findings show that Turkey's FTAs has increased its exports to these economies by 54.7% on average over five years after the FTAs entered into force. Moreover, placebo test results signal that the impact of these agreements on Turkey's export might occur before the agreements entered into force. As far as we know, this is the first study considering the effects of FTAs on countries trade by counterfactual estimators introduced by Liu et al (2022).

Keywords:

Free trade agreements (FTAs), Turkey, ex-post analysis, counterfactual impact analysis,

PDF

___

Abadie, A. & Gardeazabal, J. (2003). The Economic Costs of Conflict: A Case Study of the Basque Country. American Economic Review, 93(1), 113-132.
Abadie, A., Diamond, A. & Hainmueller, J. (2010). Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California's Tobacco Control Program. Journal of The American Statistical Association, 105(490), 493-505.
Adarov, A. (2018). Eurasian Economic Integration: Impact Evaluation Using the Gravity Model and the Synthetic Control Methods (No. 150). WIIW Working Paper.
Athey, S., Bayati, M., Doudchenko, N., Imbens, G. & Khosravi, K. (2021). Matrix Completion Methods for Causal Panel Data Models. Journal of the American Statistical Association, 116(536), 1716-1730.
Aytuğ, H., Kütük, M. M., Oduncu, A. & Togan, S. (2017). Twenty Years of the EU‐Turkey Customs Union: A Synthetic Control Method Analysis. JCMS: Journal of Common Market Studies, 55(3), 419-431.
Baier, S. L. & Bergstrand, J. H. (2007). Do Free Trade Agreements Actually Increase Members' International Trade. Journal of International Economics, 71(1), 72-95.
Baier, S. L., Bergstrand, J. H. & Bruno, J. P. (2019). Putting Canada in the Penalty Box: Trade and Welfare Effects of Eliminating NAFTA. CESifo Working Paper, No. 7678, Center for Economic Studies and ifo Institute (CESifo), Munich
Baier, S. L., Yotov, Y. V. & Zylkin, T. (2019). On the Widely Differing Effects of Free Trade Agreements: Lessons from Twenty Years of Trade Integration. Journal of International Economics, 116, 206-226.
Bekkers, E. & Rojas‐Romagosa, H. (2019). The Welfare Effects of Free Trade Agreements in Quantitative Trade Models: A Comparison of Studies about Transatlantic Trade and Investment Partnership. The World Economy, 42(1), 87-121.
Blackwell, M. & Glynn, A. N. (2018). How to Make Causal Inferences with Time-Series Cross-Sectional Data under Selection on Observables. American Political Science Review, 112(4), 1067-1082.
Brakman, S., Kohl, T. & van Marrewijk, C. (2015). The Impact of the Transatlantic Trade and Investment Partnership (TTIP) on Low Income Countries: Agreement Heterogeneity and Supply Chain Linkages. Report for the Dutch Ministry of Foreign Affairs, The Hague.
Brotto, A. (2020). The Impact of MERCOSUR on the Trade Profile of Its Members Using the Synthetic Control Method. Master Thesis.
Caliendo, L. & Parro, F. (2015). Estimates of the Trade and Welfare Effects of NAFTA. The Review of Economic Studies, 82(1), 1-44.
Demiroglu, O. & Alp, E. A. (2021). Ex-Post Assessment of Heterogeneous Effects of Trade Agreements: The Case of Turkey. Journal of Business Economics and Finance, 10(1), 12-23.
Dincer, N. N., Tekin-Koru, A. & Yaşar, P. (2018). Costs of a Missing FTA: The Case of Turkey and Algeria. Empirica, 45(3), 489-505.
ECORYS (2017). SIA in Support of the Negotiations on a Transatlantic Trade and Investment Partnership (TTIP). Final Report by Stephanie Bouman, Paul Wymenga, Joachim Schellekens, Erik Merkus, Siemen van Berkum, Edita Bezegova, Floor Timmons-Smakman, Tatiana Berden-Antonenko, Jurgen Vermeulen, Koen Berden for the European Commission.
Egger, P., Francois, J., Manchin, M. & Nelson, D. (2015). Non-Tariff Barriers, Integration and The Transatlantic Economy. Economic Policy, 30(83), 539-584.
Felbermayr, G., Heid, B., Larch, M. & Yalcin, E. (2015). Macroeconomic Potentials of Transatlantic Free Trade: A High Resolution Perspective for Europe and the World. Economic Policy, 30(83), 491-537.
Frede, J. & Yetkiner, H. (2017). The Regional Trade Dynamics of Turkey: A Panel Data Gravity Model. The Journal of International Trade & Economic Development, 26(6), 633-648.
Gobillon, L. & Magnac, T. (2016). Regional Policy Evaluation: Interactive Fixed Effects and Synthetic Controls. Review of Economics and Statistics, 98(3), 535-551.
Hannan, S. A. (2016). The Impact of Trade Agreements: New Approach, New Insights. International Monetary Fund.
Hoekman, B. (2020). Trade Wars and the World Trade Organization: Causes, Consequences, and Change. Asian Economic Policy Review, 15(1), 98-114.
Imai, K. & Kim, I. S. (2019). When Should We Use Unit Fixed Effects Regression Models for Causal Inference with Longitudinal Data?. American Journal of Political Science, 63(2), 467-490.
Jackson, K. & Shepotylo, O. (2018). Post-Brexit Trade Survival: Looking Beyond The European Union. Economic Modelling, 73, 317-328.
Kohl, T. (2014). Do We Really Know that Trade Agreements Increase Trade?. Review of World Economics, 150(3), 443-169.
Li, Q. & Moon, H. C. (2018). The Trade and Income Effects of RCEP: Implications for China and Korea. Journal of Korea Trade, 22(3), 306-318.
Liu, L., Wang, Y. & Xu, Y. (2022). A Practical Guide to Counterfactual Estimators for Causal Inference with Time-Series Cross-Sectional Data. https://ssrn.com/abstract=3555463 or http://dx.doi.org/10.2139/ssrn.3555463
Mavuş, M., Oduncu, A. & Güneş, D. (2013). The Possible Effects of Transatlantic Trade and Investment Partnership (TTIP) on Turkish Economy. MPRA Paper No. 51900
Mayer, T., Vicard, V. & Zignago, S. (2018). The Cost of Non-Europe, Revisited, The Cost of Non-Europe, Revisited. Working Papers 2018-06, CEPII Research Center.
Nicita, A. (2019). Brexit: Implication for Developing Countries (No. 83). United Nations Conference on Trade and Development.
Oberhofer, H. & Pfaffermayr, M. (2018). Estimating the Trade and Welfare Effects of Brexit: A Panel Data Structural Gravity Model. FIW Working Paper, No. 187, FIW - Research Centre International Economics, Vienna
Özkaya, H. (2011). İkili ve Çok Taraflı Anlaşmaların Türkiye’nin İhracatı Üzerindeki Etkisi. Doğuş Üniversitesi Dergisi, 12(2), 279-288.
Timini, J. & Viani, F. (2022). A Highway Across the Atlantic? Trade and Welfare Effects of the EU-Mercosur Agreement. International Economics, 169, 291-308.
Turanlı, Ş. D. (2019). The Impacts of Transatlantic Trade and Investment Partnership (TTIP) Initiative on Turkey's Foreign Trade. Master's Thesis.
Türkcan, K. & Pişkin, E. (2014). The Effects of the Trade Agreements on the Dynamics of Turkey's Export: Extensive and Intensive Margins. MPRA Paper No 59841.
Xu, Y. (2017). Generalized Synthetic Control Method: Causal Inference with Interactive Fixed Effects Models. Political Analysis, 25(1), 57-76.