Oktay Kızılkaya1, Gülbahar Üçler1, Ahmet Ay2

(1. Ahi Evran University, Turkey; 2.Selçuk University, Turkey)

 

 

Abstract: In this study, the relationship between real exchange rate and foreign direct investments were investigated by using quarterly data covering the period 1989Q1-2011Q1 for the Turkish economy. The existence of long-term relationships between these variables were tried to be determined via control variables, such as trade openness and inflation rate. For this purpose, the bound testing approach and ARDL method enabling different levels of stationary of variables and predicting short-term and long-term coefficients were employed. The findings that were obtained from the bound testing and ARDL method show that a certain implication is not possible about the long-term relationship between real exchange rate and foreign direct investments as none of the F statistics climbed over the Pesaran et al. (2001) upper bound critical values for the first model. In the second model, the findings indicate that real exchange rate, trade openness and inflation rate affect foreign direct investments positively.

 

 

Key words: real exchange rate; foreign direct investments; the bound testing approach and ARDL method;

Turkey

 

JEL codes: F2, F41