Foreign direct investment led-growth hypothesis: The Turkish case

Capital flows have been a driving force for the development of countries in globalized world economies. One type of capital flows is the foreign direct investment, which attracts attention and have been researched in a broad sense in recent studies.The purpose of this study is to research whether there is a relationship between economic growth and foreign direct investment with other variables in the Turkish case. Granger causality and Var method have been used in this thesis. The Var model was formed for Turkey and includes 1998- 2009 Turkish quarterly data for testing these methods. Gross domestic product, gross fixed investments, government final consumption expenditure, openness, foreign direct investment have been used as variables in the model. The results of the analysis of Granger causality approach have showed that only gross fixed investments cause economic growth in Turkish economy. There were not any samples showing that foreign direct investment affect the growth in causality framework. There is only a relation directed from economic growth toward foreign direct investment.Key Words1.Foreign Direct Investment2.Economic Growth3.Granger Causality4.Var Method5.Impulse Response Function