Impact of Political Risk on Foreign Direct Investment with Fourier Approach: The Case of Turkiye

Konat, Gökhan

doi:https://doi.org/10.17093/alphanumeric.1088005

Impact of Political Risk on Foreign Direct Investment with Fourier Approach: The Case of Turkiye

Gökhan Konat, Ph.D.

Abstract

Foreign direct investment (FDI) is a desirable form of capital inflows to emerging and developing countries. Such investments are less susceptible to crises and sudden breakdowns. Therefore, foreign direct investment between the political risks of using annual data for the years 1984-2019 which might influence Turkey has been tested. For this purpose, Fourier-based unit root and cointegration analysis are used. As a result of the Fourier unit root analysis, it is concluded that the FDI variable is difference stationary and the political risk variable is level stationary. For this reason, Yılancı et al. (2020), a fractional-frequency Fourier bootstrap autoregressive distributed lag (ARDL) boundary test was applied to the literature. This test, which is in nonlinear form, captures smooth transitional changes in long-term relationships. As a result of the analysis, it is seen that there is a cointegration relationship between foreign direct investments and political risk and the variables come to equilibrium in the long run. In addition, it is seen that the calculated long-term coefficient is positive and significant and the error mechanism works correctly in the short term. Therefore, as political stability is achieved foreign direct investment inflows will increase and the economies of the country will gain an advantage in reaching high levels of financial development. As a result, it is concluded that the Weak Partisan model is valid in the Turkish economy.

Keywords: Foreign Direct Investments, Fourier ARDL, Fourier KPSS, Fractional Frequency Fourier, Political Risk, Stationarity

Jel Classification: C01

Suggested citation

Konat, G. (2022). Impact of Political Risk on Foreign Direct Investment with Fourier Approach: The Case of Turkiye. Alphanumeric Journal, 10(2), 187-196. https://doi.org/10.17093/alphanumeric.1088005

bibtex

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