The Relationship Between Foreign Direct Investment Inflows and Domestic Investment in Turkey: Nonlinear ARDL Approach

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SOSYOEKONOMI, vol.29, no.49, pp.271-292, 2021 (ESCI) identifier

  • Publication Type: Article / Article
  • Volume: 29 Issue: 49
  • Publication Date: 2021
  • Doi Number: 10.17233/sosyoekonomi.2021.03.14
  • Journal Name: SOSYOEKONOMI
  • Journal Indexes: Emerging Sources Citation Index (ESCI), TR DİZİN (ULAKBİM)
  • Page Numbers: pp.271-292
  • Keywords: Foreign Direct Investment Inflows, Domestic Investment, Asymmetry, Nonlinear ARDL Approach, ECONOMIC-GROWTH, TIME-SERIES, UNIT-ROOT, FDI, COUNTRY, DETERMINANTS, LINKAGES, OPENNESS, TRADE
  • Hacettepe University Affiliated: Yes


Foreign direct investment (FDI) inflows have rapidly increased the international economic activities in developing countries since the mid-1980s. Also, FDI inflows have been considered as an important external source of productivity increase, technology transfer, and capital accumulation in these countries. Thus, it becomes important to investigate the impact of FDI inflows on domestic investment. This study analyses the relationship between FDI inflows and domestic investment in Turkey throughout 1984-2018 by employing a nonlinear ARDL approach. This study reveals an asymmetric complementary relationship between FDI inflows and domestic investment in the long run. We find that the long-run impact of a positive change (increase) in FDI inflows on domestic investment is more significant than that of a negative change (decrease). This study suggests that policymakers should formulate policies that attract more FDI inflows and improve the investment climate to increase domestic investment.