The effects of foreign direct investments on macroeconomic stability: The case of Turkey

Foreign Direct Investment is a major source of financing for both developed and developing countries. In this study, the concept of stability in Turkey, Foreign Direct VAR analysis was performed to measure the relationship between Capital Investments. In the analysis, the years 2003-2017 were examined and according to the findings, the most influential variable was the one that was the most influential variable, and the CPI-based Effective Exchange Rate was the most influential variable after itself. In economics literature, it is a matter of intense debate about the effects of international capital movements on the internal and external equilibrium conditions of the countries. In particular, the increase in the number of global crises created by short-term capital movements in the last 20 years and the capacity of these movements to carry the crisis in one country to other countries are one of the most important reasons for the increase in the studies in the literature. However, it is frequently seen in research that long-term investments provide a macroeconomic stability advantage if used correctly. This study aims at examining the relationship between foreign direct investment and macroeconomic stability in Turkey. In this context, in the first part, a conceptual framework for definition and types of foreign direct investment will be given. In the second part, various classifications and the importance of macroeconomic stability in terms of foreign capital investments will be examined. In the third part, numerical data relating to macroeconomic stability and foreign direct investment in Turkey will be given. In the last part, an econometric analysis was conducted to test the relationship between foreign direct investment and macroeconomic stability. Keywords Foreign Direct Investment, Macroeconomic Stability, VAR Analysis, Funding Sources, Interaction.