Analyzing the Relationship Between the Capacity Utilization Rate, the Real Effective Exchange Rate, and Foreign Trade Price Indices in Turkey: An ARDL Approach
DOI:
https://doi.org/10.63556/tisej.2026.1851Keywords:
Capacity Utilization,, Real Effective Exchange Rate, External Price İndices, ARDL Bounds Test, Error-Correction ModelAbstract
The capacity utilization rate (CUR) of the manufacturing industry serves as a critical leading indicator for growth cycles, inflation dynamics, and financial stability. This study aims to analyze the dynamic relationships between CUR and the real effective exchange rate (REER), export unit value index (EUVI), and import unit value index (IUVI) using quarterly data covering the period 2013Q1–2025Q3. The econometric analysis, employing the Pesaran et al. (2001) ARDL bounds test approach, confirms the existence of a statistically significant long-term cointegration relationship among the variables. The long-run coefficients indicate that a real appreciation in REER positively affects CUR, likely by reducing production costs due to the industry's high import dependency, whereas increases in export unit values negatively impact capacity utilization. The effect of import prices is found to be positive but relatively limited. Furthermore, the estimated error correction model reveals that approximately 65% of short-term disequilibria are corrected in the subsequent period, indicating a rapid adjustment mechanism. These findings confirm the sensitivity of CUR to external price and exchange rate shocks, offering significant implications for macro-financial stability policies.
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