The effects of liability dollarization on manufacturing competitiveness

Abstract

Purpose-This study aims to investigate the effect of liability dollarization on competitiveness of sub-sectors operating in Turkish manufacturing industry. Within the scope of the NACE Rev-2 classification, the study used annual data covering the 2008-2016 period for the sub-sectors of the manufacturing industry. Methodology-A group of econometric tests; fixed effects and random effects approaches have been estimated from panel data methods. Findings-Variables affecting the manufacturing industry competitiveness were found to be liability dollarization, economic globalization index, energy prices, economic crisis, trade openness, and basket exchange rate. The variable to be used as the "measure of competitiveness" to represent the dependent variable is the ratio of net exports to foreign trade volume. The estimation results show that increase in liability dollarization rate, presence of the economic crisis, and change in energy prices negatively affect competitiveness of sectors, whereas economic globalization index and trade openness have a positive effect on the competitiveness. There is no statistical significant impact of basket exchange rate on competitiveness. Conclusion-The results of this study indicate that to increase sectoral competitiveness of Turkish manufacturing sector should be increased openness effect and decreased debt dollarization ratio. While sectors increase openness, they can reach new markets and so they can increase their trade activities. But, to increase sectoral economic activity strongly, their fund problems should be solved.