The Turkish handmade carpet industry: An analysis in comparison with select Asian countries

The main purpose of this paper is to analyze the Turkish handmade carpet industry and to compare it with select Far East countries. In particular, the Turkish handmade carpet industry is compared with the handmade carpet industries of Iran, India, China, Afghanistan, Pakistan, and Nepal. In this context, the determinants of handmade carpets in the US market are analyzed empirically. Our results show that the Turkish handmade carpet industry has been experiencing a period of recession in the past decade. Through the relative comparative advantage (RCA) index and the Kreinin-Finger similarity (KFS) index, we observed that the RCA index for Turkey indicates that Turkey's RCA has been declining since 1992. However, despite this decline, the RCA of Turkey was above that of other countries until 1997. But after this, the advantage disappeared eventually and was gained by Iran. During this period, the other competitors of Turkey showed small increases. Furthermore, the empirical results from the gravity model suggests that a 10% real depreciation/appreciation of the US dollar against foreign currency leads to a 0.2% decrease/increase in imports. This finding suggests relatively low exchange rate import pass-through in carpet commodity. The results also support the Linder hypothesis that countries with similar preferences and demand structures will tend to trade more.