The Effect of Political, Economic and Financial Risks on Foreign Direct Investments: The Case of Turkey

Abstract

In this study, the effect of political, economic, and financial risks on foreign direct investments was analyzed for Turkey using the ARDL bounds test approach. The analysis using monthly data covers the period of 1992:M1-2016M:12. According to the results of the study, political risk and economic risk have a positive effect on foreign direct investments in the long run. According to the short-term results, while financial risk affects foreign direct investments positively, political and economic risks affect them negatively. These results show that political, economic, and financial stability strongly affects foreign direct investment inflows in Turkey. For this reason, it is very important to consider country risks to attract foreign direct investment inflows that contribute to the growth, development, and financial development of Turkey, which is a developing country.