Abstract:

Foreign direct investments (FDI) in Turkey expanded rapidly following the liberalization programme initiated in early 1980s. Turkey accomplished a record level in terms of its performance to attract FDI in post-2000 era. Foreign currency inflow, capital stock increase, employment generation, and technology transfer are among the benefits of FDI to host country. The most significant impact of FDI is contribution to host country’s economy through realizing production. This empirical study explores the relationship between FDI and economic growth in Turkey using time series analysis for 1980-2015 period. Johansen Co-integration test results demonstrated a positive long-run relationship between economic growth and FDI, and the effect was found as statistically significant. According to Granger causality test findings, there is bidirectional causality between economic growth and FDI. The results of this study imply that a positive change in level of FDI is likely to increase the production of goods and services in Turkey.

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