An empirical analysis concerning determinants of foreign direct investments: Evidence from Turkey

Foreign direct investments have emerged as an important economic tool in economies with the acceleration of globalization since the 1980s. In the 1980s foreign direct investment flows have increased rapidly, with the thought that they provide some advantages to both countries and investors. In this way, Turkey too have considered and supported foreign direct investments as an important source of capital to provide the necessary external financing in the course of economic growth. While there are prevailing opinions that foreign direct investments creates positive effects such as capital stock, employment and national production level in economies, it is thought that foreign direct investment provides opportunities for its investors such as cheap labor force, raw materials, natural resources and operating in new markets. Accordingly, foreign direct investment and its determinants have often been the subject of academic studies. Considering the importance attributed to foreign direct investment, this study investigate of how the openness, public expenditure, foreign exchange rate and geopolitical risk effect foreign direct investments flows to Turkey during 2006:Q1-2020:Q3. In this study, autoregressive distributed lag (ARDL) model was used as the analysis method. The fact that the impact of geopolitical risks and public expenditures on foreign direct investments in Turkey has been analyzed with time series analysis constitutes the original contribution of the study. According to the findings of the analysis, public expenditures and the geopolitic risk negatively affect the level of foreign direct investments in the long run.