DETERMINANTS OF INTRA-INDUSTRY TRADE BETWEEN GEORGIA AND SELECTED EUROPEAN COUNTRIES AND TURKEY

OpenAlex · İngilizce

When Georgia’s foreign trade structure is examined, it is seen that it is an important trade partner of Turkey and the European Union. Although Georgia wants to increase its foreign trade with liberalization policies, it has a foreign trade deficit because of production diversity and insufficient volume. As the financing of the foreign trade deficit with foreign capital and debt is not sustainable in the long term, measuring the level of intra-industry trade and the factors that determine trade of Georgia with its trade partners become important. In this context, the main purpose of the study is to measure Georgia’s intra-industry trade with selected European countries and Turkey and to determine its determinants. The study period covers for the year 2008-2022. The Grubel-Lloyd index, that is frequently preferred in the literature, was used to measure Georgia’s intra-industry trade with its trade partners, and the system generalized moments (GMM) method, that is a panel data estimation method, was used to estimate the determinants of intra-industry trade. When Georgia’s average intra-industry trade index for the year 2008-2022 is examined; it is revealed that it has more intensive intra-industry trade with Germany, Italy, England, Netherlands, Greece and Turkey than other selected EU member countries. In addition, Georgia has very low intra-industry trade with Sweden, Austria, Czech Republic, Romania and Bulgaria. Furthermore, the system GMM estimation results show that the market size (GDP), per capita GDP indicating the level of development and foreign trade deficit between trading partners positively affects intra-industry trade, while the market size difference between countries, per capita GDP difference, trade imbalance and physical distance increase reduce intra-industry trade.