Investigation of the Effect of International Capital Movements on Growth and Unemployment: Panel Data Analysis

As countries started to adopt more and more liberal policies, both foreign direct investments and portfolio investments started to increase at the global level. Countries make efforts to attract such investments, which are called foreign investments. Foreign investments, which are considered to be important for developing countries, are also highly demanded by developed countries. The aim of this study is to investigate the effects of foreign direct capital investments on growth and unemployment and portfolio investments on growth in both developed and developing countries. In this study, in which the effects of foreign investments on developed countries and developing countries are compared, 15 developed and 15 developing countries were examined by panel data analysis method using the annual data of these countries between 1993 and 2018. According to the results of the analysis, it was concluded that foreign direct investments increased the growth rates of both developed and developing countries and decreased unemployment rates. However, there was no statistical effect of portfolio investments on the growth rates of developed and developing countries. In addition, it has been concluded that the contribution of foreign direct investments to increasing the growth rates and reducing unemployment rates of developing countries is greater than the contribution to developed countries. In this context, in terms of countries that want to attract foreign direct investment, applications such as reducing bureaucratic obstacles, and providing various incentives, improving infrastructures, providing free or low-cost space to companies that want to invest in organized industrial zones and energy support can be considered as factors that will increase FDI inflows.