Abstract
This paper mainly attempts to investigate empirically the Northern Cyprus output performance by using a panel data method for the period 1977-2005. A supplementary aim is to assess the impact of export orientation on the Northern Cyprus output level. Empirical results suggest that investment, employment and export variables significantly and positively affect the sectoral production increases in Northern Cyprus. Among other variables, exports of goods and services exert considerable affects on the sectoral production in the case of Northern Cyprus economy. Therefore, it can be suggested that a production structure mostly dependent on foreign demand makes it easier to overcome the restrictions originating from the insufficiency of the domestic market through creating new employment opportunities for highly qualified labor force and additional production capacity with productive investments. Moreover, exports have the potential to rise total factor productivities, and hence, to improve output expansion of the country further. In short, one may propose that outward orientation seems to be relevant in achieving higher levels of output in the case of the Northern Cyprus economy.