The effect of foreign direct investments on economic growth: An econometric analysis on Turkey and China

The impact of foreign direct investment has been an important area of investigation in many Economic theories. In this study, the long run and short run effects of foreign direct investment on Economic growth are aimed to be investigated with a comparative perspective for Turkey and China and to achive this, ARDL bounds testing methodology is utilized to evaluate the long run and short run effects simultaneously. In the empirical section that utilizes yearly data corresponding to 1980-2018 and 1983-2018 for Turkey and China, respectively; the data is obtained from the World Bank database. The empirical findings of the study suggest that the foreign direct investment has positive effects both in Turkish and Chinese economies, and this positive effect holds both in the short and in the long run. Accordingly, in the long run, a 1% increase in foreign direct investments results in a 0.25% (1.22%) increase in the gross domestic product in Turkey (in China) while the short run impact is calculated as 0.126% (in Turkey) and 0.07% (in China). Granger causality test results also confirm unidirectional causality running from the foreign direct investments to gross domestic products of both countries.