FDI and Economic Growth: Comparative Analyses between Turkey and the other OECD Countries

Several studies in the field have demonstrated theoretically and empirically that foreign direct investments are a source of economic growth. This study aims to comparatively investigate the effects of foreign direct investments on economic growth in the cases of Turkey and other OECD countries. With this objective, a Time Series Analysis was conducted for Turkey’s economy and a Panel Data Analysis was conducted for OECD countries. In the Time Series Analysis, gross domestic product was chosen as the dependent variable, while foreign direct investments and exports were chosen as the independent variables. In the Panel Data Analysis, gross domestic product was chosen as the dependent variable, while the independent variables were chosen as foreign direct investments, employment, capital stock and total factor productivity. As a result of the tests carried out in the study, it was determined that the method of Vector Error Correction Model should be used for the Time Series Analysis, and the method of Fixed-Effects Regression with Driscoll-Kraay Standard Errors should be used for the Panel Data Analysis. According to the results of the Vector Error Correction Model, no long-term or short-term relationship was found between foreign direct investments and economic growth in Turkey’s economy. According to the results of Fixed-Effects Regression with Driscoll-Kraay Standard Errors, foreign direct investments affected economic growth in the positive direction in OECD countries.

Anahtar Kelimeler: Foreign direct investments, Economic growth, Vector Error Correction Model, Fixed-Effects Regression with Driscoll-Kraay Standard Errors

Several studies in the field have demonstrated theoretically and empirically that foreign direct investments are a source of economic growth. This study aims to comparatively investigate the effects of foreign direct investments on economic growth in the cases of Turkey and other OECD countries. With this objective, a Time Series Analysis was conducted for Turkey’s economy and a Panel Data Analysis was conducted for OECD countries. In the Time Series Analysis, gross domestic product was chosen as the dependent variable, while foreign direct investments and exports were chosen as the independent variables. In the Panel Data Analysis, gross domestic product was chosen as the dependent variable, while the independent variables were chosen as foreign direct investments, employment, capital stock and total factor productivity. As a result of the tests carried out in the study, it was determined that the method of Vector Error Correction Model should be used for the Time Series Analysis, and the method of Fixed-Effects Regression with Driscoll-Kraay Standard Errors should be used for the Panel Data Analysis. According to the results of the Vector Error Correction Model, no long-term or short-term relationship was found between foreign direct investments and economic growth in Turkey’s economy. According to the results of Fixed-Effects Regression with Driscoll-Kraay Standard Errors, foreign direct investments affected economic growth in the positive direction in OECD countries.

Keywords: Foreign direct investments, Economic growth, Vector Error Correction Model, Fixed-Effects Regression with Driscoll-Kraay Standard Errors

Sayfa Aralığı: 207-216

Ünsal, M. E. (2017). FDI and Economic Growth: Comparative Analyses between Turkey and the other OECD Countries. Journal of Current Researches on Business and Economics, 7 (2), 207-216.