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Cointegration and Causality among Foreign Direct Investment in Tourism Sector, GDP, and Exchange Rate Volatility in Turkey

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  • Sekmen, Fuat

Abstract

The Granger-causality (GC) and error correction (ECM) techniques were applied 1980-2005 data for Turkey to examine cointegration and causality among foreign direct investment(FDI) in tourism sector, overall GDP, and exchange rate volatility (EX). According to the ECM technique, the hypothesis that “no cointegration” was rejected for all three variables. The GC results detect causality runs from one-way from GDP to FDI, but the GC results detect bi-directional causality between GDP and EX suggesting that GDP and EX are jointly determined, but one way causality running from FDI to EX.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8736.

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Date of creation: Jan 2007
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Handle: RePEc:pra:mprapa:8736

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Related research

Keywords: Cointegration; Causality; Vector Error Correction Model; Turkey;

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  1. Giovannini, Alberto, 1988. "Exchange rates and traded goods prices," Journal of International Economics, Elsevier, vol. 24(1-2), pages 45-68, February.
  2. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
  3. Henrik Hansen & John Rand, 2004. "On the Causal Links between FDI and Growth in Developing Countries," Discussion Papers 04-30, University of Copenhagen. Department of Economics.
  4. Jong Il Choe, 2003. "Do Foreign Direct Investment and Gross Domestic Investment Promote Economic Growth?," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 44-57, February.
  5. Eduardo Borensztein & Jose De Gregorio & Jong-Wha Lee, 1995. "How Does Foreign Direct Investment Affect Economic Growth?," NBER Working Papers 5057, National Bureau of Economic Research, Inc.
  6. Joseph E. Gagnon, 1989. "Exchange rate variability and the level of international trade," International Finance Discussion Papers 369, Board of Governors of the Federal Reserve System (U.S.).
  7. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
  8. Ethier, Wilfred, 1973. "International Trade and the Forward Exchange Market," American Economic Review, American Economic Association, vol. 63(3), pages 494-503, June.
  9. Franke, Gunter, 1991. "Exchange rate volatility and international trading strategy," Journal of International Money and Finance, Elsevier, vol. 10(2), pages 292-307, June.
  10. Broll, Udo, 1994. "Foreign Production and Forward Markets," Australian Economic Papers, Wiley Blackwell, vol. 33(62), pages 1-6, June.
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Cited by:
  1. Temiz, Dilek & Gökmen, Aytaç, 2014. "FDI inflow as an international business operation by MNCs and economic growth: An empirical study on Turkey," International Business Review, Elsevier, vol. 23(1), pages 145-154.

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