Does foreign direct investment affect economic growth? The case of Turkey
Abstract
Purpose
The purpose of this paper is to analyze the impact of inward foreign direct investment (FDI) and international trade on economic growth in Turkey for the post-liberalization period (1980-2010).
Design/methodology/approach
The paper employs the vector auto-regression model with four variables: real GDP growth, real inward FDI, the real import volume index and the real export volume index.
Findings
Empirical results suggest a relationship between economic growth, inward FDI and exports.
Practical implications
The results derived in this paper shed light on the relationship between FDI and international trade on economic growth for Turkey, which has been applying an export-led growth strategy since 1980, and has been implementing many regulations to attract foreign capital. It is evident that although Turkey's efforts and the importance of this issue, new policies and stabilization regulations must be established for the Turkish economy.
Originality/value
This study contributes to the literature in at least two aspects. First, a comparative analysis of Turkey's inward and outward FDI with respect to different country groups was analyzed. Second, apart from other studies, the effect of inward FDI and international trade on Turkey's economic growth was tested utilizing an econometric method from 1980 to 2010, which is a relatively long time period for Turkey.
Keywords
Acknowledgements
This paper was presented at the 9th International Conference on Advances in Applied Financial Economics (AFE), Samos Island, Greece, June 28-30, 2012.
Citation
Cambazoglu, B. and Simay Karaalp, H. (2014), "Does foreign direct investment affect economic growth? The case of Turkey", International Journal of Social Economics, Vol. 41 No. 6, pp. 434-449. https://doi.org/10.1108/IJSE-02-2012-0173
Publisher
:Emerald Group Publishing Limited
Copyright © 2014, Emerald Group Publishing Limited