Determinants of foreign portfolio ınvestments: a panel ARDL model application to BRICS countries and Türkiye

With the impact of globalization, the integration of financial markets has intensified, and foreign portfolio investments have become an important component of international capital flows. Foreign portfolio investments can contribute to a country's financial system by enhancing capital mobility and market efficiency. In this study, the internal and external factors affecting foreign portfolio investments were analyzed using the Panel ARDL model for the BRICS countries and Türkiye. The originality of the study lies in its examination of internal and external determinants of foreign portfolio investments on a unique country group sample. Annual data from the period 1994–2023 were used for this purpose. In the study, foreign portfolio investments served as the dependent variable. The independent variables included exports, gross domestic product, inflation, and total labor force. The results showed that, in the long run, exports had a positive effect on foreign portfolio investments, while labor force growth had a negative effect. Economic growth exhibited a strong positive effect on foreign portfolio investments, whereas high inflation weakened investor confidence, negatively affecting capital inflows. These findings suggest that economic growth and labor market stability promote foreign investments, while inflation deters them. The error correction coefficients were found to be negative and significant, indicating that short-term imbalances are strongly corrected toward the long-run equilibrium. This reflects a rapid and effective adjustment mechanism, leading to a faster convergence to long-term equilibrium.