The determinants of foreign direct investment in Turkey: an empirical analysis

Esiyok, Bulent (2010) The determinants of foreign direct investment in Turkey: an empirical analysis. PhD thesis, University of Greenwich.

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Abstract

This study examines the determinants of foreign direct investment (FDI) and the effect of FDI on trade in a panel of bilateral outward FDI stocks of 19 OECD countries in Turkey between 1982 and 2007. Employing a knowledge-capital model, this study finds that joint national incomes, per capita difference, investment liberalisation and the cost of exporting to Turkey have significant effects on FDI in Turkey. In addition, the prospect of European Union membership, government stability, infrastructure, bilateral exchange rate, exchange rate volatility and openness to trade play an important role in determining the amount of FDI in Turkey. Moreover, this study finds that high relative unit labour costs and corruption provide stimuli to FDI.

Using an augmented gravity model to investigate the relationship between FDI and imports, this study finds that outward FDI stocks are positively related to the exports. Overall, the empirical results indicate that FDI in Turkey is mainly motivated by market access and sensitive to the quality of institutions.

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