The Relationship between Foreign Direct Investments and Uncertainty at the Sectoral Level: The Case of Türkiye
Chapter from the book: Eroğlu Sevinç, D. & Yüce Akıncı, G. (eds.) 2023. Studies on Economic and Financial Policies.

Adem Türkmen
Erzurum Technical University
İkram Yusuf Yarbaşı
Erzurum Technical University

Synopsis

Investors, who make their investment decisions by considering many economic and institutional factors, are faced with many risks, including uncertainty, in terms of their investments abroad. Although knowing the relationship between uncertainty and FDI is important at this point, there are very few studies in the literature investigating this relationship at the sectoral level. For this reason, the question of how FDI inflows in the industry and service sector in Turkey are affected by internal and external uncertainty has been tried to be determined with quarterly data between the years 2005-2022. After testing the stationary of the series, the results were obtained by making predictions with ARDL models. According to the results of the analysis, while significant relations were determined for the industry sector, a statistically significant model for the service sector could not be estimated. In the long run, it has been found that FDI in the industrial sector is positively related to economic growth, internal uncertainty, and external uncertainty, but negatively related to real effective exchange rate and inflation. According to the short-term results; the internal uncertainty result is parallel to the long-term and it is seen that the risk is accepted as an opportunity for foreign investors. On the other hand, it was also found that the relationship between global uncertainty and FDI inflows is negative even at different lags.

How to cite this book

Türkmen, A. & Yarbaşı, İ. Y. (2023). The Relationship between Foreign Direct Investments and Uncertainty at the Sectoral Level: The Case of Türkiye. In: Eroğlu Sevinç, D. & Yüce Akıncı, G. (eds.), Studies on Economic and Financial Policies. Özgür Publications. DOI: https://doi.org/10.58830/ozgur.pub68.c317

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Published

March 24, 2023

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