Interplay of Foreign Direct Investments, International Trade, and Economic Growth: Evidence from Turkey

Purpose: This paper examines the intricate relationships between foreign direct investments, international trade, and economic growth in the context of Turkey, focusing on key economic indicators and their influence on growth. Design/methodology/approach: The study employs econometric techniques, including Vector Error Correction Model and regression analysis, to investigate the short-term and long-term interactions among variables such as foreign direct investments inflows and outflows, inflation, labor market indicators, research and development expenditures, openness ratio, interest rate, and real effective exchange rate indices. Findings: The findings reveal that foreign direct investments inflows and trade openness positively impact economic growth, while foreign direct investments outflows and inflation exert negative effects. Additionally, the study identifies unexpected relationships, such as a positive link between unemployment and growth, providing new insights into Turkey's economic dynamics. Research limitations/implications: The research emphasizes the need for further investigation into country-specific factors and external shocks that influence the interplay between foreign direct investments, trade, and economic growth in Turkey. Future studies could expand the scope to include comparative analyses with other emerging economies. Originality/value: This paper contributes to the understanding of how foreign direct investments and international trade shape economic growth in Turkey, offering policymakers valuable insights for designing strategies to manage external shocks and promote sustainable growth in a globalized economic environment.