This thesis examines the relationship between the bilateral real exchange rate and the trade balances of 20 industries in which majority of the trade between Turkey and her leading partner Germany is carried out, both for the short and long run, in search of the existence of any J-curve effect. Using quarterly data over the period 1989:1-2011:3, the relationship is analyzed empirically through the bounds testing approach to cointegration and error correction modeling. The findings show that, although the pattern created by a depreciation does not follow the compl ete J curve in any of the industries, still the exchange rate as well as foreign and domestic real incomes are effective determinants of bilateral trade balance between Turkey and Germany in majority of the cases both in the short and in the long run. Moreover, this thesis provides strong support for the assertion that at the disaggregate level industries exhibit unique and distinct trade balance responses to exchange rate fluctuations, by showing that these responses vary significantly across different sectors both in the short and long run.