Determinants of international capital movements, an analysis in the context of foreign direct investment and foreign portfolio investments: The case of Turkey

The purpose of this study is to analyse the determinants of the international capital invested in Turkey, removed the borders as to international capital flows in 1989, and to show relationship between this factors and international capital inflows. In this context; Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI), generating a great majority of international capital flows, are concerned. The economic determinants of FDI has been estimated by cointegration analysis with multiple structural breaks of Maki (2012) and and Dynamic Ordinary Least Squars (DOLS) method. The economic determinants of FPI has been specified by Bounds Test approach and Autoregressive Distributed Lag Model (ARDL) models. According to emprical results; it is seen that the economic determinants of FDI are GDP, trade openess, inflation and unit labour cost. GDP, trade openess and unit labour costs have a positive effect on FDI and inflation affects FDI negatively. The economic determainants of FPI have been found as GDP, BIST-100 index, interest rate, exchange rate and financial openess. In the short term; GDP, BIST-100 index, interst rate and financial openess affect the FPI inflows positively and in the long term while GDP, interest rate and exchange rate affect the FPI inflow positively, BİST-100 index affects FPI inflow negatively.