Dynamic Impacts of Exchange Rates, Trade Openness, and GDP Growth on Turkiye’s Service Imports: A NARDL Approach

This study examines the impact of the Real Effective Exchange Rate (REER), trade openness, and GDP growth on Turkiye’s service imports using a Nonlinear Autoregressive Distributed Lag (NARDL) model, analyzing data from 2005Q1 to 2023Q2. Services imports are crucial for Turkiye’s technological advancement and human capital development, but also worsen the trade deficit. The results reveal that in the short term, both positive and negative changes in the REER and trade openness affect service imports, confirming the rigidity of demand. GDP growth changes are insignificant. In the long term, however, the REER becomes insignificant; only positive shocks to trade openness permanently boost service imports while GDP growth remains insignificant. These findings emphasize the disconnection between exchange rates and service imports in the long run, and suggest that policymakers should focus on the structure of trade rather than currency policies to control import levels.