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Purpose – The purpose of this paper is to analyze the impact of inward foreign direct investment (FDI) and international trade on economic growth in Turkey for the post-liberalization period (1980-2010). Design/methodology/approach – The paper employs the vector auto-regression model with four variables: real GDP growth, real inward FDI, the real import volume index and the real export volume index. Findings – Empirical results suggest a relationship between economic growth, inward FDI and exports. Practical implications – The results derived in this paper shed light on the relationship between FDI and international trade on economic growth for Turkey, which has been applying an export-led growth strategy since 1980, and has been implementing many regulations to attract foreign capital. It is evident that although Turkey's efforts and the importance of this issue, new policies and stabilization regulations must be established for the Turkish economy. Originality/value – This study contributes to the literature in at least two aspects. First, a comparative analysis of Turkey's inward and outward FDI with respect to different country groups was analyzed. Second, apart from other studies, the effect of inward FDI and international trade on Turkey's economic growth was tested utilizing an econometric method from 1980 to 2010, which is a relatively long time period for Turkey.

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Abstract-Classical Ricardian theory of comparative advantage states that differences in labor productivities determine trade patterns. Many publications have focused on labor productivity differences as an important variable in determination of trade flows among countries. However few studies focused on both productivity and labor cost differences and their effects on countries' export performance. Unit labor cost (ULC) combines the effects of productivity, labor cost and exchange rate. An increase in ULC implies that labor costs rise more than productivity gains. As a result, comparative advantage deteriorates. The aim of this study is to contribute validity of classical model by inquiring the effect of relative unit labor cost (RULC) in determination of trade flows between Turkey and Germany. We used annual Turkish and German data for the period of 2002 to 2008 for five major manufacturing sectors which are food and beverages, tobacco products, textiles, wearing apparel, leather and leather products. Export and import data are obtained from TurkStat. The ULC data set are calculated by using UNIDO value added and wage data set. The estimation results show that Ricardian theory explains trade pattern between Turkey and Germany. Increase in relative unit cost in Turkey effects relative export performance of Turkey negatively.