Beyond Linearity: Exchange Rate Asymmetries and the Trade Balance in Türkiye

This study examines the asymmetric effects of real exchange rate changes on Türkiye’s trade balance with its main trading partners—the United States, the United Kingdom, and Germany—over the period 2002: Q1–2024: Q4. Using quarterly panel data and the Panel Nonlinear ARDL (P-NARDL) approach, the analysis captures both short- and long-run asymmetries between real exchange rate depreciation and appreciation. The results show that the response of the trade balance to real exchange rate movements is asymmetric and varies widely across industries and partners. Rather than improving the balance everywhere, a depreciation helps only a limited set of industries and worsens it in many that depend on imported inputs, and the dominant channel differs by partner: the depreciation component for the United States, the appreciation component for the United Kingdom, and income for Germany.