The effect of financial development and foreign portfolio investments on economic growth: An econometric application on Turkey

Financial development and foreign portfolio investments have become important with globalization and have become among the topics that have been researched a lot. Dec. For this reason, the concepts of financial development and foreign portfolio have gained importance. The development of financial markets is defined as financial development. Foreign portfolio investments, on the other hand, are mostly realized by investing in the country's funds through purchases made on the host country's stock exchange and deposits. The relationship between financial development and economic growth has been discussed from different perspectives when looking at the literature. According to some researchers, financial development has a significant impact on economic growth, while according to some researchers, there is an opinion that the impact is minimal. In studies conducted in recent years related to foreign investments, it has been found that these countries have closed the investment and technology gap and accelerated their economic growth even more with the effect of foreign capital inflows. Realization of economic growth and its Decisiveness are among the main goals of economies. Financial development and foreign portfolio investments, which are one of the factors contributing to the realization of growth, are very important for countries. In the study, the effect of financial development and foreign portfolio investments on economic growth in the periods of 1993-2019 was aimed to Decipher the long-term relationship between the variables using the time series method. According to the results of the study, it has been determined that financial development, portfolio investments and economic growth series are stable. As a result of the tests carried out, a long-term Decointegration relationship was determined between all series. Identified cointegration coefficient of the relationship that have been made in order to determine the direction and according to the test results, between financial development and economic growth have long-term negative relationship identified between foreign portfolio investment and economic growth have a positive long-term relationship identified. According to the results of the Granger causality test, it was determined that there is a one-way causality relationship from financial development to economic growth and from foreign portfolio investments to economic growth. Keywords: Financial Development, Foreign Portfolio Investments, Economic Growth, Time Series Analysis.