Analysis of the foreign trade sector in the Turkish Republic of Northern Cyprus and its impact on economic growth

Foreign trade is very important for all the countries around the world regardless of their size, geographical location, and economic structures. Foreign trade and specially exports might be major sources of economic growth, both directly, because exports are part of production, and indirectly, as exports facilitate imports of goods and services, and of new ideas, knowledge, and technology. Large countries are less dependent on foreign trade than smaller ones. In small countries, the propensity to export spans a wider range. Very small countries are generally quite dependent on foreign trade. The importance of foreign trade for smaller countries have been defined as "engine of growth" by famous economists. Studies that have investigated the relationship between economic growth and foreign trade, have mostly concentrated on developing countries. Some parts of literature in development economics includes those studies that have investigated the causal relationship between economic growth, foreign trade growth (and, export growth and import growth). Turkish Republic of Northern Cyprus (TRNC) is highly dependent on foreign trade although the significancy of exports is at a decreasing trend over the years because of its international political and economic isolation The share of exports, imports and trade volume in GNP has been 6.03%, 44.05% and 50.1% in 1998. The study will analyze the structure, historical developments and significancy of foreign trade for TRNC to be tested as "engine of growth" by econometric modelling techniques. The hypothesis to be tested will be as "Foreign trade is an engine of growth, so in order to achieve economic growth foreign trade should be developed accordingly"