The Effects of Democracy on Foreign Direct Investment in Turkey: ARDL Approach

Article Information
Journal: Business and Economics Research Journal
Title of Article: The Effects of Democracy on Foreign Direct Investment in Turkey: ARDL Approach
Author(s): Dilek Tandogan, Murat Can Genc
Volume: 11
Number: 3
Year: 2020
Page: 635-646
ISSN: 2619-9491
DOI Number: 10.20409/berj.2020.274
Foreign direct investments are an important resource contributing to economic growth, especially for developing countries. In this context, determining the factors affecting foreign direct investment inflows to the host country is among the important issues. Necessary policies can be created to increase foreign direct investment inflows in host country by determining the mentioned factors. Thus, competitive advantage will be obtained in the international arena. As the level of democracy develops, FDI increases as the confidence in the country increases. The aim of this study is to determine the effect of democracy on foreign direct investment in Turkey by using ARDL approach with annual data for the period of 1974-2018. The empirical results of the Bounds test stated that the variables are cointegrated. The findings obtained from ARDL model estimation indicate that increases in level of democracy increase foreign direct investment in Turkey in short and long run. Therefore, the study is important in terms of demonstrating the importance of democracy in efforts to increase foreign direct investments to the country.

Keywords: Democracy, Foreign Direct Investment, ARDL Approach, Turkey

JEL Classification: F10, C22 Full Text