Effects of foreign direct investment on economic growth: Turkish experience

Foreign direct investments create positive effects in the process of emerging countries? development such as financing the economic development, improving the balance of payments, transferring the technological innovations and accumulation of knowledge into the country. Therefore, emerging countries aim to attract foreign direct investment to their country. After 1990, Turkey also intends to benefit from the positive affects of incoming foreign direct investment by liberalization the capital movements.The aim of this study is to investigate the affects of foreign direct investments on the economic growth of Turkey after the financial liberalization. The study consists of three sections. The first section summaries the foreign direct investment in a conceptual framework. In addition, foreign direct investment theories and the factors effecting the foreign direct investment decisions are explained. In the second section, the effects of foreign direct investment on home countries and host countries and on economic development are analyzed. In the third section, development and characteristics of foreign direct investment in Turkey are emphasized and afterwards, an econometric model is tested whether foreign direct investment promotes economic growth in Turkey. A VAR model is build using the data of turkey between 1998-2012. A significant relationship cannot be found between foreign direct investment and economic growth in this period.