ARE FOREIGN DIRECT INVESTMENTS STILL IMPORTANT FOR GROWTH? A NEW APPROACH FOR TÜRKİYE

Abstract

So far, especially underdeveloped and developing countries have tried to attract foreign direct investments by adopting open economy policies. In this study, we investigated whether direct foreign investments have a significant impact on the gross domestic product of countries. For this purpose, we examined the long-term relationships between GDP and foreign direct investment between 1986 and 2020 in Türkiye, which is considered a developing country, with a new approach, structural breaks. The results of the research show that there is a two-way positive relationship between the variables. Accordingly, while GDP affects foreign direct investments in the long run, foreign direct investments also affect GDP. The findings obtained from the CCR, FMOLS and DOLS methods used to estimate the coefficients in the long term are generally consistent with each other. It is understood from this study that the policy of adopting open economy policies and attracting direct investments continues to be valid in Turkiye.