FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN TURKEY: AN EMPIRICAL INVESTIGATION BY THE BOUNDS TEST FOR CO-INTEGRATION AND CAUSALITY TESTS

Abstract

This paper empirically investigates the level relationship and the direction of causality between net foreign direct investment (FDI) inflows and economic growth in Turkey by using the bounds test for co-integration and Granger causality tests. Results suggest that both variables are in long-run equilibrium relationship only when FDI is dependent variable tinder the ARDL (auto-regressive distributed lag) modeling approach. Final investigation in the paper is that economic expansion in Turkey stimulates expansion in net FDI inflows.