The causality between FDI and sector-specific production in Turkey: evidence from threshold cointegration with regime shifts

This article considers bidirectional nonlinear cointegration relation between FDI and industrial output in Turkey. The data cover the monthly period 2005:1-2013:10 for the time series of total industrial production, 36 sub-industrial sectors' production and FDI. Following nonlinear threshold co...

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Bibliographic Details
Published in:Applied economics 2016-01, Vol.48 (5), p.345-360
Main Authors: Bilgili, Faik, Tülüce, Nadide S., Doğan, Ibrahim, Bağlıtaş, H. Hilal
Format: Article
Language:English
Subjects:
Causality
Cointegration analysis
Foreign direct investment
Foreign investment
Industrial production
Output
regime shifts
specific industrial production
Studies
threshold cointegration
Time series
Turkey
VECM
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Summary:This article considers bidirectional nonlinear cointegration relation between FDI and industrial output in Turkey. The data cover the monthly period 2005:1-2013:10 for the time series of total industrial production, 36 sub-industrial sectors' production and FDI. Following nonlinear threshold cointegration and VECMs, the article yields that (i) total industrial production and nine sub-industrial productions have positive long-run impact on FDI with significant error corrections, (ii) six sub-industrial productions have short-term influence on FDI, (iii) FDI has long-run positive impulse on total industrial production and nine sub-industrial productions with some significant error corrections and (iv) FDI affects four sub-industrial productions in the short run as well as in the long run. The results of VECMs from (i) also reveal that the all short-term adjustment parameters are found significant and powerful in 10 typical regimes (Regime-1s) and in 5 extreme regimes (Regime-2s). Finally, the outcome of VECMs from (iii) yields that short-term adjustment parameters are found significant and powerful in two typical regimes and in four extreme regimes. Eventually, considering FDI's positive impact in the short and long run, this article suggests that policymakers promote specifically the FDI inflows to the sectors of intermediate goods, manufacture of beverages, manufacture of rubber and plastic and manufacture of other nonmetallic mineral products.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2015.1078451