Foreign direct investments, democracy, and economic growth in Turkey
International Journal of Social Economics
ISSN: 0306-8293
Article publication date: 13 February 2017
Abstract
Purpose
In the last decade, foreign direct investment (FDI) flows have increased dramatically in the world, especially in the emerging economies. Some of these countries make changes in their market conditions that will improve the civil rights and liberties to attract better FDI flows. The purpose of this paper is to test the linkage between democracy and FDI flows to Turkey.
Design/methodology/approach
The present study employs a bounds testing procedure developed (Pesaran et al., 2001) for cointegration analysis on six different long-run models with selected determinants of FDIs with yearly data from 1977 to 2011.
Findings
The intuition the paper empirically provides how improvements in democracy have a significant positive impact on FDI flows to Turkey. The results may also put forward that, in the long run, FDI inflows will have spillover effects in Turkey’s economy.
Research limitations/implications
Although one drawback in the study is having a small sample size of 35 observations, estimating six different long-run models is one way to overcome it. Thus presented results may be in short of simplification for some readers. This, however, opens an opportunity for future studies to further the proposal by employing in different models and/or longer data sets if possible.
Practical implications
A stable government policies, more civil freedom, and sustained institution politics should not be ignored in Turkey given its geopolitical location.
Originality/value
This paper satisfies the established need to study of democracy and FDI flows link is necessary in an emerging market such as Turkey.
Keywords
Acknowledgements
The author would like to thank Henry Thompson, Hyeongwoo Kim, and participants at the UHV’s School of Business Administration faculty seminar series for their useful comments. Also, two referees of this journal provided suggestions that considerably improved the paper.
Citation
Durmaz, N. (2017), "Foreign direct investments, democracy, and economic growth in Turkey", International Journal of Social Economics, Vol. 44 No. 2, pp. 232-252. https://doi.org/10.1108/IJSE-01-2015-0015
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited