FOREIGN DIRECT INVESTMENTS AND ECONOMİC GROWTH: HOW WELL DOES THE TECHNOLOGY CHANNEL WORK IN TURKEY?

Authors : Yusuf Bayraktutan, Meltem Tari Özgür

Pages : 20-38

Doi:10.18825/iremjournal.271040

View : 16 | Download : 11

Publication Date : 2017-03-13

Article Type : Research

Abstract :The interaction between foreign direct investments (FDI) and economic growth is one of the frequently discussed issues in the literature, both theoretically and empirically. The role of different channels through which FDI promotes economic growth is an aspect that should be focused on. The main purpose of this study is to assess the impact of the technology spillovers as a driving force for economic growth of Turkey  in terms of manufacturing industry using the data of 1988-2012 period. For this aim, the dynamic interactions between export of the manufacturing industry (EXP) as a measure of technology spillover, gross domestic product (GDP), gross fixed capital formation (GFCF) and FDI in manufacturing industry were investigated via cointegration and causality tests in addition to the innovation accounting techniques in the vector autoregressive (VAR) framework. While the cointegration test yields no clear evidence of long-run equilibrium relationship among these variables. Granger causality test indicates that there is a univariate causality running from the EXP to the all other variables, and FDI is not Granger cause for the other variables. Nevertheless, the positive impact of FDI on the GDP and EXP variables is observed within the results of the innovation accounting analysis. From this point of view, it is concluded that the FDI leads economic growth more significantly in indirect ways rather than through direct ways. Under the light of these empirical outcomes, proposing policies based on strategies which encourage FDI inflows to the sub-sectors of manufacturing industry with higher technological gaps seem as effective and valuable in terms of promoting economic growth.
Keywords : Foreign direkt invesment, Economic growth, Manufacturing Industry