This study investigates whether fluctuations in the real exchange rate give rise to symmetric or asymmetric J-curve effects in manufacturing trade between Türkiye and Germany, thereby positioning the analysis within and contributing to the broader scholarly discourse on exchange rate–trade balance dynamics. Using monthly data for the period 2013M01–2025M07, the paper first estimates a linear Autoregressive Distributed Lag (ARDL) model for the bilateral manufacturing trade balance and subsequently extends the framework to a nonlinear ARDL (NARDL) specification, which explicitly incorporates symmetry and asymmetry by decomposing real exchange rate changes into positive (depreciation) and negative (appreciation) partial sums. The linear ARDL results provide no evidence of a conventional J-curve and suggest that the aggregate impact of the real exchange rate is weak and often statistically insignificant. In contrast, the NARDL estimates uncover pronounced long-run and cumulative short-run asymmetries: real depreciations of the Turkish lira are associated with a persistent improvement in the bilateral manufacturing trade balance, whereas appreciations exert weak and statistically insignificant effects, a finding that remains robust when a real effective exchange rate measure is employed. Overall, the evidence indicates that Türkiye–Germany manufacturing trade does not conform to the standard J-curve pattern. These findings suggest that trade policy should adopt an asymmetric stance toward exchange rate movements: since depreciations yield persistent trade balance improvements while appreciations produce negligible effects, policies designed to support export competitiveness should prioritize the management of depreciation episodes rather than assuming symmetric adjustment dynamics.
Derya Hekim (Sat,) studied this question.