Testing for Symmetric and Asymmetric Causality between FDI and Foreign Trade in Turkey

Uğur Korkut Pata
Harun Terzi
JEL codes: 
C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models, F14 - Empirical Studies of Trade, F21 - International Investment; Long-Term Capital Movements.
In this paper, the relationship between FDI and foreign trade is investigated by symmetric; Sims (1972), Dolado-Lütkepohl (1996), Hacker-Hatemi (2006) and asymmetric; Hatemi-J (2012) causality analysis after the liberalization period 1983-2014 for the Turkish economy. The results of the empirical analysis show that unidirectional positive and statistically significant causality is going from total (goods and services) and only goods export, import and foreign trade (total import and export) to FDI. The conclusion is that findings point out to the existence of complementary relationship between the variables. Consequently, these results support that the government should encourage foreign trade to increase FDI inflows in Turkey.
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