Effect of foreign direct investment enhancement reforms in developing countries on growth: Turkey - Russia comparison (After 2000)

In this study, effects of reforms related to Foreign Direct Investment (FDI) on economic growth in Turkey and Russia after 2000 period is investigated separately for 1992:Q1-1999:Q4 and 2000:Q1-2017:Q4 periods. Labor force and oil prices are also added to the model as control variables. Correlation analysis reveals a strong relationship between independent variables and dependent variable. Stationarity of the series are examined by ADF, PP and Vogelsang and Perron (1998) unit root tests with structural break and all series are found to be I(1). Cointegration relationships between the series are investigated by Johansen (1988) test and it is determined that the series are cointegrated. The structural breaks in the cointegration equation are determined by Bai and Perron (2003) method, and are included in the long-term analysis with dummy variables. Long and short term analyzes are performed by VEC method. In the analysis; it is seen that 1% increase in FDI stock improves national income per capita by 1.2% before 2000 and 0.31% after 2000 in Turkey while declines it 0.04% before 2000 and inclines it by 0.1% after 2000 in Russia. In the post-2000 period, reforms to attract more FDI become successful in both countries as their FDI stock raises and national income per capita in Turkey is affected more than that in Russia. It is estimated that 1% grow in labor force increases economic growth by 0.48% in Turkey after 2000 while increases it by 0.67% before 2000 and by 4.31% after 2000 in Russia. 1% increase in oil prices descends national income per capita in Turkey by 0.95% before 2000 and 0.2% after 2000 while it causes 0.04% incline in Russia's national income per capita in post-2000 period.