ABSTRACT

This chapter presents the set of estimation results introducing variables measuring the "openness" of each sector into the regressions. This provides an opportunity to analyze the export and import exposure of the individual sectors in conjunction with real investment in the manufacturing sectors. The regressions using three-digit level sector data show this negative effect better than the regressions using two-digit level sector data. The coefficient of the variable that measures foreign trade exposure of the sector has a negative sign and is statistically significant in the regressions using three-digit level data. The coefficient of the variable that measures export exposure of the sector is negatively significant only in equation using total investment data. The export exposure of the sectors has negatively significant effects on investment. Real exchange rate appreciations decrease investment when export share of the sectors increases. In the same way, the import exposure of the sectors has positively significant effects on investment.