Effects of Foreign Direct Investment on Growth in Turkey

Abstract

This study aims at analyzing the relationship between Foreign Direct Investment and Growth in Turkey by using Threshold Cointegration. As the studies about the impact of Foreign Direct Investment on growth are surveyed, it is seen that all of them uses liner methods except two. Starting point of these studies that use liner methods are the positive relationship between Growth and Foreign Direct Investment. As such, Yılmaz and Barbaros (2006) find positive relationship between Foreign Direct Investment and market size in Turkey between 1980 and 2001. Erdal and Tatoğlu (2002) reach the same conclusion for the period of 1980-1998 by using real Gross Domestic Product as a proxy for market size. Deichmann, Karidis and Sayek (2003) find positive linkage between Foreign Direct Investment and Gross Domestic Product in Turkey by using Conditional Logit Model. Bildirici and Bozoklu (2008) find positive relationship between growth and Foreign Direct Investment by using Markov Switching Vector Auto Regression method. Katırcıoğlu (2009) analyses the connection between Foreign Direct Investment and economic development by using Auto Regressive Distributed Lag and indicates that economic development causes net Foreign Direct Investment. Darrat and Sarkar (2009) state the affirmative effects of the Foreign Direct Investment on growth as expected theoretically. Bildirici, Bozoklu (2008) find positive relationship between growth and Foreign Direct Investment in Turkey. Bildirici, Alp and Kayıkçı (2010) state the existence of threshold effect for these variables. This study intends to research this effect in historical perspective, using Threshold Cointegration Analysis.

The Relationship between Foreign Direct Investment and Economic Growth: A Case of Turkey

“…For the evidence from Turkey, Bildirici et al (2010) used quarterly time series data from 1992:Q1 to 2008:Q4 to analyze the relationship between FDI and economic growth derived from Industrial Production Index. They employed threshold the VAR models and separated periods into two regimes.…”

The Impact of Foreign Direct Investment on Economic Growth: A Case Study of Turkey 1980–2012

“…After 5 years, the FDI inflow increased to 30 billion dollars and the number of foreign companies rose to 114. Government nationalized 24 foreign companies by 1928 and 25 foreign companies between 1933 and 1945 (Bildirici, 2010). 1980(The world bank, 2013 Prior to 1980, Turkey had put many limitations on foreign direct investment and trade.…”