Abstract:

One of the biggest economic problems seen in developing countries is that the savings rates are not at the desired level and accordingly, the investments that form the basis of economic growth are insufficient. This situation pushes the countries that are faced with a lack of savings to benefit from foreign resources, especially foreign direct investments, and if these resources cannot be withdrawn, borrowing is resorted to. It gains importance for both developed and developing countries due to many advantages such as new technology, employment opportunities, and contribution to the country's exports, which foreign direct investments provide to the host country together with the capital. In this study, the relationship between the exchange rate, which affects and is affected by foreign direct investments, and foreign direct investments has been investigated for the Turkish economy. The relationship between exchange rates and foreign direct investments between 2005Q4-2018Q4 was tested with ADF unit root tests, Engle-Granger cointegration tests, error correction models and Hendry model. As a result of the ADF unit root tests applied to the variables, it was observed that the variables were stationary at the 1st difference values. The estimation results revealed that there is a relationship between foreign direct investments and exchange rates in the long run. In the short run, it has been concluded that there is no relationship between these two variables and that foreign direct investments are affected by their previous values.

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