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Paper Details

RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH IN DEVELOPING COUNTRIES

Mustafa Emir1, Melih Kutlu2

Journal Title:Journal of Economics, Finance and Accounting (JEFA)
Abstract


Its way the growth and development of developing countries such as Turkey faced structural problems and it is both a cause and a result of lack of capital accumulation which is the most effective way of overcoming are external financing sources. The expectation of scarce resources of developing countries from foreign capital is growth by increasing domestic investment and savings. However experience in countries which macroeconomic indicators corrupt, borrowing rates are high and more intensely felt short-term borrowing it is observed that the fall through of these expectations. Especially due to short-term foreign funds have high speculative and volatility this funds leave the country when negative expectations increased rapidly in the period and crises can arise as a factor affecting. This situation negatively affects growth and hence development. Due to various negativities caused by short-term investment in the development process of the country, especially considering the long-term benefits to them are trying to attract foreign direct investment. In this study causality relations between GDP and foreign direct investment are tested by the help of Granger Causality Analyze yearly data in 1983-2012 period. As a result, the causal relationship between foreign direct investment and economic growth have been identified.

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