This study analyzes the long-term relationships between inflation and trade openness in Türkiye. Using annual data from 1975 to 2024, the study employs annual percentage change in the consumer price index to represent inflation, and the share of total trade in gross domestic product to represent trade openness. Long-term cointegration relationships between the variables are examined using the Engle & Granger (1987) cointegration method and the Granger & Yoon (2002) hidden cointegration method. The findings from the Engle & Granger (1987) test reveal a long-term cointegration relationship from inflation to trade openness in Türkiye during the relevant period. Meanwhile, the Granger & Yoon (2002) test detects hidden cointegration relationships from the positive and negative components of inflation to the negative components of trade openness. Following the identification of hidden cointegration relationships, long-term coefficients are estimated using FMOLS, DOLS, and CCR estimators. According to the estimation results, a 1-unit increase in the positive components of inflation causes a decrease of approximately 0.26 units in the negative components of trade openness. Conversely, a 1-unit increase in the negative components of inflation increases the negative components of trade openness by approximately 0.22 units. In general, the findings indicate that increases in inflation during the relevant period reduced the contraction in trade openness in Türkiye, while decreases deepened it.
Ümit YILDIZ (Tue,) studied this question.
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