Effect of indirect investment on economic: Example of Turkey

Financial liberalization and globalization was the dominant issues on world wide scale. the great development in free market economy by the help of gobalization put financial movements on the agenda. The need of foreign fiancial support for the development of GOÜ?s; more profitable investment oppoortunitiy demands of developed countries and general acceptance financial lberalization policies have greatly accelerated international finacial movements.This process wihich came into being especially with globalizationin 80?s by investers who included foreign stocks to their portfolios for portfolio diversification and reduced risk, have entered Turkey associated with foreign exposition and liberalization policies of 24?th of January 1980 decisions.The aim of this study is invesitgating the effects of indirect foreign investments (stocks and bond) which entered into Turkish economy which removed all the restrictions on financial movements in 1980 and opened itself to international financial flows, on selected macroeconomic variables in accordance with econometric methods.The term of foreign capital was briefly described in the first part of the study. In this section, foreign capital was discussed in a conceptual frame work, then classified and information was present about its types. Reasons of foreign capital entrance and its effects on national economies was also discussed as subtitles in the first section.In the second section of the study, definitions, types and causes of indirect foreign investments were invesitigated as subtitles. Also, chronological development of indirect foreign investments and their effects on natinal economies were described. Globalizaiton of turkish finace sector, inidrect investments on Turkey and, the causes and effects of these investments were disccused as subtitles.In the third part of the study, the effects of portfolio investments (stocks and bonds) which came to Turkey as a part of international capital circulation, on selected macroeconomical variables (average income per individual, GDP, physical investments, foreign trade, export - import rates, and interests) were tested by multiple regression analysis between 1989-2007 period and it was concluded that indirect foreign investments had positive effects on the variables mentioned above-except interests.Keywords: Indirect Foreign Investment, Economic, Turkey.