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Determinants of private investments in Turkey: Examining the role of democracy

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  • Akçay Selçuk

    (Afyon Kocatepe University, Faculty of Economics and Administrative Sciences, Department of Economics, Afyonkarahisar, Turkey.)

  • Karasoy Alper

    (Afyon Kocatepe University, Faculty of Economics and Administrative Sciences, Department of Economics, Afyonkarahisar, Turkey.)

Abstract

This study investigates the determinants of private sector investments in Turkey with a focus on democracy. Using the Autoregressive Distributed Lag (ARDL) bounds testing approach and two different democracy indices along with the other determinants of private investment, we estimated a private investment function for the 1975-2014 period. Our main finding is that democracy has a profound positive impact on private investment. Moreover, the results show that: (i) public investment is a substitute to private investment; (ii) macroeconomic instability dissuades private investment; (iii) real interest is a serious impediment to private investment; (iv) financial development and GDP growth rate stimulate private investment.

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  • Akçay Selçuk & Karasoy Alper, 2020. "Determinants of private investments in Turkey: Examining the role of democracy," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 23-49, March.
    • Handle: RePEc:vrs:reoecp:v:20:y:2020:i:1:p:23-49:n:2
    DOI: 10.2478/revecp-2020-0002
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    More about this item

    Keywords

    ARDL; democracy; private investment; Turkey;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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