The Effects of Foreign Direct Investment on Türkiye’s Economic Growth

Abstract

This study examines the effects of foreign direct investment (FDI) on economic growth in Türkiye using an annual macroeconometric framework that explicitly accounts for timing, policy-regime dependence, and transmission channels. The empirical design is motivated by the view that FDI effects are not uniform across long historical periods and may emerge with lags rather than contemporaneously. Using World Development Indicators data for 1980 to 2024, the paper estimates a dynamic growth specification for real GDP per capita growth with lagged FDI, standard macroeconomic controls, crisis controls, and an interaction term that tests whether the growth effect of FDI changed in the post-2002 policy regime. To complement the baseline growth equation, the analysis also estimates channel equations that examine whether FDI is associated with domestic investment intensity and export-side technological upgrading. The results indicate that the growth contribution of FDI in Türkiye is regime sensitive and better captured in a dynamic framework than in a static average-effect specification. The evidence is consistent with delayed FDI effects and stronger transmission in the post-restructuring period. Channel results further suggest that part of FDI’s macroeconomic relevance operates through investment formation and technology-related export composition, rather than solely through a direct contemporaneous effect on growth.