Effects of Uncertainties on Mode of Payment Terms in Foreign Trade between Turkey and the US: The Time-Varying Bootstrap Causality Test

In this study, the effects of trade and economy policy uncertainties (TPU and EPU) and degree of volatility in the stock markets (VIX) on mode of payment preferred in foreign trade activities between Turkey and the US were analyzed through the Hacker and Hatemi-J (2012) bootstrap causality test for the 2002:01-2021:M05 periods, and the Yilanci and Kilci (2021) time-varying bootstrap causality test for the sub-periods. According to the Hacker and Hatemi-J (2012) test, there are causality relations from TPU to Turkey's cash exports to the US, from VIX to Turkey's deferred exports to the US, from EPU to Turkey's deferred imports from the US as well as to the payment against goods import. The results of the Yilanci and Kilci (2021) test show that the Turkish and US companies try to secure themselves, preferring cash exports during periods of increased uncertainties in the US' trade and economy policies. This impact has stood out more specifically during Trump's presidency (2016-2020) and Covid-19 pandemic. While EPU has been more determinative in deferred exports from Turkey to the US, TPU, EPU and VIX have been more effective in Turkey's imports from the US. EPU and VIX are the determinants in payment against goods trade activities between Turkey and the US. Therefore, for Turkish companies trading with the US, it would be fine to follow closely the TPU, EPU and VIX indicators in the US.