The relationship between economic complexity index and economic growth: The case of Türkiye

The 'economic complexity index', which affects knowledge and technology intensive production developed with the concepts of 'diversity' and 'ubiquity', has an important place in the growth and development literature in recent years. The aim of this study is to examine the relationship between economic complexity and growth with the economic complexity index (ECI) and per capita income (GDP) values for the years 1995-2022 in the comparison of Turkey and BRICS-T countries. In the study, the case of Türkiye was tested using time series analysis, while the BRICS-T sample was tested with panel data analysis method. In the time series analysis; Augmented Dickey Fuller (ADF) test, Engle-Granger cointegration test, error correction test, impulse response test, variance decomposition test and Granger causality test were applied. According to the results of the Granger causality test, a causality relationship was determined from the economic complexity variable to per capita income. For the Türkiye economy, when eight years are ignored in a twenty eight year period, it has been seen that economic complexity values affect growth. In the BRICS-T sample panel data analysis of the study; Breusch-Pagan (1980) LM test, Pesaran Yamagata (2008) delta test, Pesaran (2007) CADF and CIPS test, Gengenbach-Urbain-Westerlund (2016) cointegration test, CCE (Common Correlated Effects Model) test and panel VECM (Vector Error Correction Model) test were applied. According to the results of panel data analysis, it was observed that there is a causal relationship between the variables in the short and long term. As a result, in the comparison of BRICS-T country, a one-way causality relationship has been identified from economic complexity to per capita income in the short term; a one-way causality relationship from per capita income to the level of economic complexity in the long term. This finding shows that if Türkiye becomes a member of BRICS, it can rise to the position of a country that produces and exports products based on information and technology with a high level of complexity. Therefore, when the BRICS countries accept Türkiye as a member, they will have easy access to products with a high level of complexity. Türkiye and the BRICS countries can achieve their sustainable growth targets by diversifying their export baskets with complex and high value-added products, by increasing investment incentives in technology intensive sectors.