The relationship between economic growth and foreign direct investments in Turkey (1984-2013)

Foreign direct investments (FDI) are defined as a cross border trade that is an investment implemented at outside of home countries by multinational companies and countries. FDI has became widespread in the 1950s and has gained importance with the globalization movement after the 1980s in the World economy. In this study, the relations between FDI and economic growth, employment, capital formation are analyzed for the period of 1984-2013 in the Turkish economy. The causality relationship among the variables is analyzed by the Johansen-Juselius co-integration test, Granger causality test, Hsiao's Granger causality test, modified Sims causality test and Toda-Yamamoto causality test. According to the results of Johansen-Juselius cointegration test, there is no co-integration movement among FDI and economic growth, employment, capital formation in the long run. Similar findings of the Granger, Hsiao, modified Sims and Toda-Yamamoto causality tests examining the short term causality relationships, are obtained. Empirical findings indicate that there is a positive one-way causality relationship running from the economic growth to FDI and from capital formation to FDI, but there is no any causality relationship between FDI and employment. Key Words: FDI, Economic Growth, Employment, Capital Formation, Toda-Yamamoto,Turkey