Causal relationship between foreign direct investment and economic growth: Evidence from Turkey

Abstract

In this chapter, the authors investigate the causality relationship between the inflows of foreign direct investment (FDI) and economic growth as measured by Real Gross Domestic Product (GDP) per capita in Turkey during the period 1974-2012 by using the Granger causality tests. The causality test indicates that economic growth Granger-causes FDI. This means that there is bidirectional causality from Reel GDP to FDI in Turkey. So the author results support "the growth-driven FDI hypothesis". This demonstrates that in the related time in Turkey, more direct foreign investment entered the economy together with an increase in economic growth.