FOREIGN CAPITAL FLOWS, FDI AND ECONOMIC GROWTH INTURKEY IN THE POST CRISIS PERIOD

• Main Authors: F. Dilvin Taşkın, Mustafa Reha Okur
• Format: Article
• Language: English
• Published: Social Sciences Research Society 2014-01-01
• Series: International Journal of Economics and Finance Studies
• Online Access: http://www.sobiad.org/eJOURNALS/journal_IJEF/archieves/IJEF-2014_1/f_dilvin.pdf

The impact of foreign direct investments (FDI), portfolio investments (PI) oneconomic growth has been a debate in the literature. On the other hand economicgrowth may be a factor that attracts the FDIs and PIs. Thus, the aim of this paperis to analyze the direction of the relationship byusing Granger causality betweeneconomic growth, foreign direct investments and portfolio investments in Turkeyfollowing the 2001 crisis. The results show that PIs Granger causes economicgrowth whereas FDIs do not show a significance. Economic growth grangercauses both FDIs and PIs meaning that economic growth leads the flow of directand indirect investments. In addition, impulse response functions support theimportance of economic growth on the three variables. The paper furthercalculates variance decompositions based on estimated VAR system and it is stillevident that the economic growth is dominantly significant in explaining theforecast error variance in both FDIs, PIs and economic growth.