THE EFFECT OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH: THE CASE OF TURKEY

In developing countries adequate and necessary investment cannot be realized since their domestic savings rate is low and foreign savings rate is very low. Here FDI helps diminish domestic and foreign savings deficits. Capital account liberalization in Turkey was initiated in conjunction with the process of economic and financial reforms that started in 1980, and was fully completed in 1989. In this paper, the objective is to analyze the relationship between FDI and economic growth in Turkey by using the data covering the time period between 2002:Q1 and 2014:Q1. For this purpose unit root test, Johansen cointegration test, and variance decomposition were applied. According to the findings there is no relationship between these variables in the long run.