The Relationships between Foreign Direct Investment, Trade Openness, and Economic Growth: The Case of Selected Countries and Turkey

Year 2021, Issue: 35, 111 - 128, 31.12.2021

Suna Şahin

https://doi.org/10.26650/ekoist.2021.35.984568

Abstract

Globalization has highlighted the importance of the relationships between foreign direct investment (FDI), trade openness, and economic growth, especially in developed and developing countries; therefore, this is one of the most important issues in the international economy. FDI and trade openness are widely recognized as crucial factors in the process of economic growth. In this context, the aim of the current study is to examine the relationships between FDI, trade openness, and economic growth in selected countries (i.e., South Africa, India, Colombia, and Mexico) and Turkey. Particularly, this study investigates whether FDI and international trade contributed positively to the economic growth of the selected countries over the period 1998–2019. The countries examined in this study were selected because they are developing countries; therefore, especially open to foreign trade and FDI. The data of the study were obtained from the World Bank website. The Levin, Lin, and Chu test, panel Granger causality analysis, and Westerlund panel cointegration test were employed for unit root testing to investigate the relations of interest. Results indicated that FDI and international trade are indeed important determinants of growth in the selected countries. A two-way causality was found between gross domestic product (GDP) and FDI, and GDP was identified as a Granger cause of trade openness. The findings obtained by cointegration analysis appear to be valid even in the long term. Policy makers in the selected countries may need to liberalize their economies and reduce or remove trade barriers to encourage foreign trade and FDI inflows if they aim to achieve strong and sustainable economic growth.

Keywords

Foreign Direct Investment, Trade Openness, Economic Growth, International Trade

Doğrudan Yabancı Yatırım, Ticari Açıklık ve Ekonomik Büyüme Arasındaki İlişki: Seçilmiş Ülkeler ve Türkiye Örneği

Abstract

Küreselleşme eğiliminin giderek derinlik kazanması özellikle gelişmiş ve gelişmekte olan ülkelerde doğrudan yabancı yatırım, ticari açıklık ve ekonomik büyüme arasındaki ilişkinin önemini daha da artırmış; dolayısıyla bu ilişki uluslararası ekonominin en önemli konularından birisi haline gelmiştir. Hem doğrudan yabancı yatırımın hem de ticari açıklığın büyümeyi açıklamada rolü, ekonomik büyüme sürecinde çok önemli bir faktör olarak geniş çapta kabul görmüştür. Bu bağlamda çalışmanın amacı seçilmiş ülkeler (Güney Afrika, Hindistan, Kolombiya, Meksika) ve Türkiye’de doğrudan yabancı yatırım, ticari açıklık ve ekonomik büyüme arasındaki ilişkiyi incelemektir. Diğer bir ifadeyle seçilen ülkeler için doğrudan yabancı yatırımların ve uluslararası ticaretin ülkelerin ekonomik büyümeye olumlu katkı sağlayıp sağlamadıklarını araştırmaktır. Seçilen ülkeler gelişmekte olan ülke konumunda olmasından ve dış ticaret ile doğrudan yabancı yatırımlara daha açık oldukları için tercih edilmiştir. Bu çalışma, 1998-2019 dönemini kapsamaktadır. Çalışmaya ait veriler Worldbank sitesinden edinilmiştir. 1998-2019 yılları kapsamında ilişkileri araştırmak adına birim kök için Levin,Lin ve Chu (LLC) testi, Panel Granger Nedensellik analizi ve Westerlund Panel eşbütünleşme testi kullanılmıştır. Çalışma sonucunda doğrudan yabancı yatırımların ve uluslararası ticaretin gerçekten de seçilen ülkeler için büyümenin önemli belirleyicileri olduğu tespit edilmiştir. Çalışmada gayri safi yurtiçi hasıla ve doğrudan yabancı yatırımlar arasında çift yönlü bir nedensellik bulunmuştur. Gayri safi yurtiçi hasıla aynı zamanda ticari açıklığın da Granger nedeni olarak tespit edilmiştir. Yapılan eşbütünleşme analizi ile elde edilen bulguların uzun dönemde de geçerli olduğu söylenebilir. Çalışma sonucu çıkan öneri, seçilen ülkelerdeki politika yapıcılarının, sürdürülebilir bir yüksek ekonomik büyüme elde etmek istiyorlarsa dış ticaretlerini ve doğrudan yabancı yatırımların girişlerini teşvik etmek için ekonomilerini liberalleştirmeleri, ticaret engellerini azaltmaları ya da kaldırmalarının gerekli olduğudur.

Keywords

Doğrudan Yabancı Yatırımlar, Ticari Açıklık, Ekonomik Büyüme, Uluslararası Ticaret

References

• Abbes, S.M., Guelli, B.M., Seghir, G.M. and Zakarya, G.Y. (2014). Causal Interactions between FDI, and Economic Growth: Evidence from Dynamic Panel Co-Integration. Procedia Economics and Finance, 3, 276-290. https://doi.org/10.1016/S2212-5671(15)00541-9
• Adegbite, E.O. and Ayadi, F.S. (2010).The Role of Foreign Direct Investment in Economic Development: A Study of Nigeria. World Journal of Entrepreneurship, Management and Sustainable Development, 6(1-2), 133-147. https://doi.org/10.1108/20425961201000011
• Aizenman, J. and Noy, I. (2006). Fdi and Trade – Two-Way Linkages? The Quarterly Review of Economics and Finance, 46(3), 317-337.
• Akinlo, A. (2004).Foreign Direct Investment and Growth in Nigeria: An Empirical Investigation. Journal of Policy Modeling, 26 (5), 627-639.
• Alabi, K.O. (2019).The Impact of Foreign Direct Investment on Economic Growth: Nigeria Experience. Open Journal of Applied Sciences, 9, 372-385. https://doi.org/10.4236/ojapps.2019.9503
• Alesina, A. and Wacziarg, R. (1998) Openness, Country Size, and Government. Journal of Public Economics, 69 (3), 305-321. https://doi.org/10.1016/S0047-2727(98)00010-3 Ali, N. and Hussain, H. (2017).Impact of Foreign Direct Investment on the Economic Growth of Pakistan. American Journal of Economics, 7 (4), 163-170.
• Dondashe, N. and Phiri, A. (2018). Determinants of FDI in South Africa: Do Macroeconomic Variables Metter? Munich Personal RePEc Archive (MPRA) Paper No. 83636.
• Dritsakia, C. and Stiakakis, E. (2014). Foreign Direct Investments, Exports, and Economic Growth in Croatia: A Time Series Analysis , Procedia Economics and Finance 14 , 181 –190
• Dutta, C. B., Haider, M. Z. and Das, D. K. (2017). Dynamics of Economic Growth, Investment, and Trade Openness: Evidence from Bangladesh. South Asian Journal of Macroeconomics and Public Finance, 6, 82-104.
• Farshid, P., Ali, S. and Gholamhosein, S. (2009). The Impact of Foreign Direct Investment and Trade on Economic Growth-Taking China, Korea, Malaysia, Philippines & Thailand for Example, China-USA Business Review, 8, 37-43.
• Hisarciklilar, M., Kayam, S., Kayalica, M. and Ozkale, N.L. (2006) Foreign Direct Investment and Growth in Mediterranean Countries. http://emo.pspa.uoa.gr/data/papers/2_paper.pdf 139-164.
• Hye, Q.M.A. and Lau, W. (2015). Trade Openness and Economic Growth: Empirical Evidence from India. Journal of Business Economics and Management, 16(1), 188-205.
• Jonsson, G. and Subramanian, A. (2000). Dynamic Gains from Trade: Evidence from South Africa. IMF Working Paper No. 00/45, International Monetary Fund, Washington DC. https://doi.org/10.5089/9781451846461.001
• Keho, Y.(2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire, Cogent Economics & Finance, 5 (1), 1-14. 1332820, DOI: 10.1080/23322039.2017.1332820
• Le, T.-H., Kim, J. and Lee, M. (2015). Institutional Quality, Trade Openness, and Financial Development in Asia: An Empirical Investigation. Asian Development Bank, Philippines.
• Louzi, B.M. and Abadi, A. (2011). The Impact of Foreign Direct Investment on Economic Growth in Jordan. IJRRAS, 8, 253-258.
• Makki S. S. and Somwaru, A. (2004). Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries. American Journal of Agricultural Economics, 86 (3), 795-801. https://doi.org/10.1111/j.0002-9092.2004.00627.x
• Nketiah, E., Cai, X., Adjei, M. and Boamah, B.B. (2020). Foreign Direct Investment, Trade Openness and Economic Growth: Evidence from Ghana. Open Journal of Business and Management, 8, 39-55. https://doi.org/10.4236/ojbm.2020.81003
• Ogbokor, C.A. (2016). Econometrıc Analysıs Of The Impact Of Foreıgn Dırect Investment On Economıc Growth In Namıbıa: Evıdence From Annual Data, Internatıonal Journal Of Economıcs And Fınance Studies, 8 (2), 205-218.
• Owusu, M. (2016). The Determinants of Foreign Direct Investment Inflows in Ghana. Kwame Nkrumah University of Science and Technology, Kumasi, 1-86.
• Pesaran, H.M. (2004). General Diagnostic Tests for Corss Section Dependence in Panels. IZA Discussion Paper, 1240, http://ftp.iza.org/dp1240.pdf
• Sakyi, D., Commodore, R. and Opoku, E. E. O. (2015). Foreign Direct Investment, Trade Openness and Economic Growth in Ghana: An Empirical Investigation. Journal of African Business, 16, 1-15. https://doi.org/10.1080/15228916.2015.1061283
• Samantha, N. and Haiyun, L. (2017). The Impact of FDI on the Economic Growth of Sri Lanka: An ARDL Approach to Co-integration, 3(5), 70-82.
• SenGupta, S.(2020). How trade openness influenced economic growth in India: An empirical investigation. Indian Journal of Economics and Development, Vol. 8, 1-14. Doi: https://doi.org/ 10.17485/IJED/v8.21
• Serge, C. and Yue, Y. (2010). The Relationship between Foreign Direct Investment, Trade Openness and Growth in Cote d’Ivoire. International Journal of Business and Management, 5(7), 99-107.
• Su, D. Thanh, Nguyen, P. Canh, and Christophe, S. (2019). Impact of foreign direct investment, trade openness and economic institutions on growth in emerging countries: The case of Vietnam. Journal of International Studies, 12(3), 243- 264. doi:10.14254/2071-8330.2019/12-3/20
• Tatoğlu, F.Y. (2018). Panel Veri Ekonometrisi Stata Uygulamalı. İstanbul: Beta Yayınevi.
• Trinh, N.H. and Nguyen, Q.A.M. (2015). The Impact of Foreign Direct Investment on Economic Growth: Evidence from Vietnam, Developing Country Studies, 5(20),1-9.
• Ümit, Ö.A. (2016). Türkiye’de Ticari Açıklık, Finansal Açıklık ve Ekonomik Büyüme Arasındaki İlişkiler: Sınır Testi Yaklaşımı, Niğde Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi , 9(1), 255-272.
• Ved, P. and Sudesh, P. (2007). An Empirical Investigation of the Causal Relationship between Openness and Economic Growth in India. Asian Economic Review, 49, 485-494.
• Wiredu, J., Nketiah, E. and Adjei, M. (2020). The Relationship between Trade Openness, Foreign Direct Investment and Economic Growth in West Africa: Static Panel Data Model. Journal of Human Resource and Sustainability Studies, 8, 18-34. https://doi.org/10.4236/jhrss.2020.81002