The Impact Assessment of Turkey's FTAs: Application of Synthetic Control Method and Gravity Model

Abstract

For almost 30 years, free trade agreements (FTAs) have been one of the most crucial types of economic integration. As a result of the World Trade Organization's (WTO) failure to provide additional levels of liberalization, countries use bilateral and regional free trade agreements broadly to promote trade and growth. Thus, utilizing the benefits of free trade agreements is vital for countries. Turkey signed 38 FTAs and there are 22 FTAs in force. Considering the importance of FTAs, this research aims to analyze the effect of Turkey's free trade agreements on Turkey’s exports and imports. The gravity model is used as a workhorse to analyze international trade. This thesis contributes to the literature by using a synthetic control method in addition to gravity model in order to obtain robust inferences and compare the findings. The dataset covers 160 countries and 1990-2020 period. According to gravity model and synthetic control method results, only Israel, Morocco, Egypt, South Korea, Tunisia, Serbia, Malaysia, and Montenegro FTAs have significant impact on Turkey’s exports, while FTAs with Israel, Morocco, Egypt, Bosnia and Herzegovina, and Malaysia have significant effect on Turkey’s imports. The empirical results obtained in this study suggest that most of the FTAs do not have a significant effect on Turkey’s exports. The effects of FTAs can be increased with revisions aimed at enhancing the scope of the agreements and adopting new generation FTAs.