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The Relationship between Foreign Direct Investment and Economic Growth: A Case of Turkey


  • Orhan Gokmen


This paper examines the relationship between net FDI inflows and real GDP for Turkey from 1970 to 2019. Although conventional economic growth theories and most empirical research suggest that there is a bi-directional positive effect between these macro variables, the results indicate that there is a uni- directional significant short-run positive effect of real GDP on net FDI inflows to Turkey by employing the Vector Error Correction Model, Granger Causality, Impulse Response Functions and Variance Decomposition. Also, there is no long-run effect of net FDI inflows found on real GDP, yet vice-versa long-run effect has been found. The findings recommend Turkish authorities optimally benefit from the potential positive effect of net incoming FDI on the real GDP by allocating it for the productive sectoral establishments while effectively maintaining the country’s real economic growth to attract further FDI inflows.

Suggested Citation

  • Orhan Gokmen, 2021. "The Relationship between Foreign Direct Investment and Economic Growth: A Case of Turkey," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(7), pages 1-85, June.
  • Handle: RePEc:ibn:ijefaa:v:13:y:2021:i:7:p:85

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    References listed on IDEAS

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    2. Muhammad Ramzan Sheikh & Mehjabeen Ali & Rashid Ahmad & Furrukh Bashir, 2022. "Does Sustainable Development Promote Foreign Direct Investment in Pakistan? An ARDL Analysis," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 4(4), pages 647-657, December.

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General


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