Abstract:

In this study, the relationship between intermediate goods import (MI), capital goods imports (MC), industrial production (IP) and economic growth (GDP) in Turkey was explored by using the quarterly data consist of 32 observations between 2010Q1 – 2017Q4. VAR Granger causality analysis was employed to explore the short-run causality and the direction between variables. It is concluded:  a) a bidirectional causality between GDP and MI b) a bidirectional causality between (IP) and (MI), c) a unidirectional causality from IP to GDP, d) a unidirectional causality from MC to MI and there is not a causality between IP and MC. “Johansen Co-integration” test results indicated a long-run relationship between, MC, MI, IP and GDP. Variance decomposition test was employed to assess the variability of the dependent variable over time. As a result, while in the first period (quarter) GDP is explained by itself at 100%. However In the tenth period GDP is explained by 18% GDP, 18% MC, 32% MI and 32% IP..  As a result, in the short-term, industrial production and intermediate goods importation are the determinants of economic growth. However, in the long-term, capital and intermediate goods importation, industrial production are the determinants of economic growth in Turkey.

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