AN ANALYSIS OF THE DOMESTIC TERMS OF TRADE IN THE PROCESS OF TRADE LIBERALIZATION IN TURKEY: 1990-2009

In this paper, the relative price of agricultural commodities versus that of industrial commodities is analyzed via domestic terms of trade during 1990-2009 when trade liberalization gained impetus in Turkey. The domestic terms of trade which are improved in favor of the agricultural commodities during 1990-1998 except 1994 which is acknowledged as an economic crises year are reversed against the agricultural commodities after 1998 and plummeted in 2001 economic crises. The domestic terms of trade which are improved during 2001-2004 are deteriorated against the agricultural commodities after 2004. In the paper, the factors that define the domestic terms of trade during 1990-2009 are estimated via Least Squares Method with quarterly data. The findings of the paper revealed that the domestic terms of trade in Turkey are defined by the market mechanisms like the relative prices of the previous year and the relative production of the current year. Although the domestic terms of trade is not improved in favor of the agricultural commodities during the examination period, it is evident that the trade liberalization affects the domestic terms of trade in favor of the agricultural commodities. This finding is explained by the current protectionist regulations in the liberalization of the agricultural commodities trade relative to the regulations in industrial commodities trade.Domestic terms of trade, trade liberalization, agricultural sector, price scissors