THE RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND FOREIGN TRADE: A CAUSALITY ANALYSIS ON BRICS COUNTRIES AND TÜRKİYE

Abstract

Capital insufficiency is an important problem, especially for developing countries, as it is a situation that negatively affects the economic growth and development of countries. However, foreign capital circulating between countries, depending on the phenomenon of globalization and financial liberalization, supports the development of commercial relations and contributes to the increase in foreign trade. Foreign capital brought to a country by foreign capital investors also has a positive effect on economic growth by supporting production in the country. In addition to this effect, foreign capital investments also increase the foreign trade volume (export and import) of the host country, depending on the increased production capacity. Factors such as the presence of a large sales and marketing organization in the international arena of multinational companies that make foreign capital investments, having sufficient knowledge and experience about international markets are among the factors that have a positive effect on the foreign trade of the host country, especially its exports. For this reason, it can be accepted that foreign capital investments have a positive effect on the foreign trade volume and structure of the countries receiving foreign capital.

In this study; The effect of foreign direct investment in Turkey and BRICS countries on foreign trade transactions (export, import) of these countries was analyzed using panel data analysis method. The analysis was carried out using data on foreign direct investment and foreign trade transactions of Turkey and BRICS countries between 1992 and 2017, obtained from the official website of the Turkish statistical institution and the International Monetary Fund. As a result of the analysis; It has been determined that there is a statistically significant and positive relationship between foreign direct investments and the export and import volume of the country that receives the investment, and that foreign capital investments positively affect the foreign trade volume of the country.