Trade Leadership without Monetary Convergence: Türkiye's Integration with the OIC
DOI:
https://doi.org/10.59976/jebin.v4i1.338Abstract
Monetary integration among Organization of Islamic Cooperation (OIC) member countries has long attracted academic attention, yet empirical studies specifically targeting Türkiye, an economically and institutionally significant OIC member, remain limited. This study reassesses the feasibility of monetary integration between Türkiye and the OIC using updated conditions through 2025, along with its explanatory factors. Applying the Optimum Currency Area (OCA) index of Bayoumi and Eichengreen to forty-three Türkiye-OIC bilateral pairs across three ten-year periods, each pair is classified into prime converged, converging, or little converged categories, after which four explanatory criteria, namely business cycle synchronization, inflation similarity, intra trade openness, and economic size, are tested through a panel fixed effect regression. The results show that Türkiye achieves prime or converging status with only about fifty-one percent of its OIC partners, comprising ten prime converged pairs, twelve converging pairs, and twenty-one little converged pairs, a considerably smaller share than the near universal convergence reported in the benchmark study on Indonesia. The panel regression confirms inflation similarity as the only variable significant at the 1 percent level, with the model explaining roughly sixty-four percent of the variation in bilateral symmetry (adjusted R squared of 0.64), while business cycle synchronization, trade openness, and economic size are not significant. These findings indicate that Türkiye's persistently high inflation differential and the lira's chronic depreciation are the principal obstacles to its currency symmetry with the OIC, even as its trade leadership continues to strengthen through its 2025 COMCEC chairmanship. This study confirms that trade leadership can outpace monetary integration, and that domestic price stability, rather than trade diversification, is the precondition for deepening it.
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