The Determinants of Turkey's Intra-Industry Trade with European Union Countries: The Gravity Model Results (1996-2013)
In recent years, structure of world trade is transformed to intra-industry trade (IIT) that is defined as the import and export of similar commodities. The transformation of foreign trade structure has led to increase either theoretical or empirical studies on IIT. A large part of the empirical studies on international trade deals with gravity model for explaining the determinants of foreign trade. According to gravity model, trade between countries, is affected negatively to the distance between them and positively to the size of the country. Similar statements can be used in terms of the determinants of IIT. Therefore, this study will be carried out determinants of IIT with using the gravity model. In this paper, determinants of intra-industry trade in manufacturing sectors between Turkey and European Union (EU) 15 countries will be estimated by panel data regression analysis in 1996-2013 periods. The results of this study indicate that market size and foreign direct investments have positive effects and distance between countries and real effective exchange rate have negative effects on Turkey’s manufacturing sector IIT with EU 15.