The relationship between foreign direct investment and foreign trade in Turkey: Cointegration and causality analysis

In the last quarter of the twentieth century, with the increasing impact of globalization, it is observed that foreign direct investments (FDI) have a great impact on economic growth and development for both developed and developing countries and this impact has increased over time. Today, it is seen as a solution to the lack of capital accumulation that can make the investments necessary for economic development, especially in developing countries. In addition, it is among the important macroeconomic factors that create opportunities for the country to progress in the fields of economic growth and development, competitiveness, information use and technology, especially due to the advantages it provides to the host country. In this context, this study examines the relationship between foreign direct investment and foreign trade for Turkiye for the period 1980-2022 by using Johansen cointegration, Granger and Toda-Yamamoto causality analyses. According to the findings obtained from the analysis, there is no long-run relationship between the variables since no cointegrated relationship is found between the variables as a result of cointegration analysis. Granger causality analysis reveals a unidirectional causality from imports to exports. Moreover, FDI and imports are the causes of exports. According to the results of Toda-Yamamoto causality analysis, exports are the cause of FDI. Imports are also the cause of exports. Finally, there is a unidirectional causality from FDI and imports to exports. Key Words: Foreign Direct Investment, Import, Export, Causality Analysis, Cointegration Analysis