Explaining and Testing Structural Break of Relative Trade of Turkey with European Union Countries

This study explains and tests structural break of Turkey’s relative trade with the European Union countries for the period of 1982-2007. As a result, the data indicated the evidence of structural break and alternating elasticities’ signs in estimations based upon error component model. After (Before) Turkey being the member of the ECU a percentage increase in all the relative foreign income, Turkish TOT, real exchange simultaneously and a unit increase in trend is found improving (decreasing) the relative trade about 0.135 (0.78) percentage in total. However, the dynamic fixed effect model did not validate the evidence of structural break. This implies individual differences matter in relative trade not to face structural break.