THE EFFECT OF MERCHANDISE TRADE AND SERVICES TRADE VOLUME ON NATIONAL INCOME: AN APPLICATION ON EU-27 COUNTRIES

Abstract

ABSTRACT

The markets where goods and services produced through foreign trade can be exhibited are expand which improves the international production process. The natural result of this process is an increase in output. This result is important for countries that adopt an economic growth strategy. Therefore, participation in international trade is becoming more important for countries every day. In this study, by examining the effect of foreign trade volume on national income; It is aimed to determine the direction and strength of the connection between the goods trade volume and services trade volume variables and the gross domestic product (GDP) variable. The analysis was applied to EU-27 countries on single-year data using the Structural Equation Modeling (SEM) technique. In this sense, it is thought that the study will make a significant contribution to the literature in terms of the country examined and the method used. According to the analysis results; The effect of trade in Merchandise and services on GDP is positive and strong. The results gave parallel results with the literature examined and once again demonstrated the importance of foreign trade volume on national income increase.