Is The Dutch Disease Valid for Turkey in terms of the Effects of Portfolio Investments and Export Revenues on the Manufacturing Industry?

Abstract

The Dutch disease which emerges as a result of suddenly finding a large amount of commercially valuable mines, is an economical issue which has an effect on various macroeconomic variables, notably on foreign exchange rate. Although in theory, the Dutch disease is defined as a problem caused by foreign currency which is acquired by the detection and exportation of valuable mines in the long term, it is possible for other economic developments which provide inflow of foreign currency to the country to have economical effects on the national economy that are similar to the effects of the Dutch disease. In our study in which we question the existence of the Dutch disease due to the inflow of foreign currency through various channels, the effects of portfolio investments and export revenues on manufacturing industry sector were analyzed in terms of the hypothesis of the Dutch disease by using the quarterly data of 2005:Q1-2018:Q4, obtained from the Electronic Data Delivery System (EDDS) of The Central Bank of the Republic of Turkey (CBRT) and by using Toda-Yamamoto causality test. As a result of the analysis, there wasn’t a causal relationship between manufacturing industry and portfolio investments and exports. For this reason, it was concluded that the Dutch disease is out of the question for Turkey’s economy.