Abstract
This study investigates the dynamic and potentially asymmetric effects of global economic uncertainty on Turkey's foreign trade balance over the period 2005Q1 to 2023Q4. Utilizing the Nonlinear Autoregressive Distributed Lag (NARDL) cointegration framework alongside standard bounds testing procedures, the empirical analysis examines how positive and negative shocks in global economic policy uncertainty—measured via the Global Economic Policy Uncertainty (GEPU) index—interact with real effective exchange rates, domestic income, and foreign demand to determine trade balance trajectories. The empirical findings confirm the presence of a robust long-run cointegrating relationship among the variables. Crucially, the results reveal significant asymmetric responses: positive uncertainty shocks (heightened global volatility) exert a pronounced, statistically significant deteriorating effect on Turkey's trade balance, whereas negative uncertainty shocks (periods of global tranquility) yield a comparatively muted and sluggish improvement. This structural vulnerability is primarily driven by the domestic manufacturing sector's high import dependency on intermediate and capital goods, coupled with sudden contractions in foreign order volumes during heightened uncertainty episodes. The study underscores the necessity for targeted export-diversification policies, supply-chain resilience, and macroeconomic hedging mechanisms to mitigate the adverse spillovers of global economic policy fluctuations on emerging market trade balances.
