The Impacts Of Foreign Direct Investments On Economic Growth In Turkey: 1980-2015

Abstract

Foreign direct investments in Turkey have expanded rapidly following the liberalization programme initiated in the early 1980s. Turkey has accomplished a record level in terms of its performance to attract foreign direct investments (FDI) in post-2000 era. Inflow of foreign currency, increasing capital stock, generating employment and transfer of technology are among the benefits of FDI to the host country. And the contribution of FDI to the host country’s economy through realizing production is the most significant impact of the FDI to the recipient country. The study aims to explore the impacts of the foreign direct investments on economic growth during the years 1980 to 2015 using time series analysis. The annual data of the gross domestic product (GDP), foreign direct investment (FDI) inflows, direct investments, and foreign trade announced by TURKSTAT, CBRT and Ministry of Development were employed in the study. According to the results of the analysis, there is a positive long-run relationship between economic growth and other variables. The Augmented Dickey Fuller unit root test results suggest that the variables are non-stationary at levels, but become stationary in the first differences. Through the Johansen Co-integration test, the relationship between the variables have been explored and it has been found that there is long-run relationship between GDP and other variables, and the effect is statistically significant. Also, finding of Granger causality states that there is a bidirectional causality between FDI and GDP. The results of this study imply that a positive change in the level of foreign direct investments is likely to increase the production of goods and services in Turkey.