• ISSN: 2148-2225 (online)

Ulaştırma ve Lojistik Kongreleri

alphanumeric journal

The Journal of Operations Research, Statistics, Econometrics and Management Information Systems

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

Gökhan Konat, Ph.D.


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


  • Abeyasinghe, R. (2004). Democracy, political stability, and developing country growth: theory and evidence. Illinois Wesleyan University. Honours Projects. Paper 17.
  • Alesina, A., Özler, S., Roubini, N. and Swagel, P. (1996). Political instability and economic growth. Journal of Economic Growth, 1(2), 189 - 211.
  • Baek, K. and Qian, X. (2011). An analysis on political risks and the flow of foreign direct investment in developing and industrialized economies. Economics, Management and Financial Markets, 6(4), 60 - 91.
  • Bal, H. and Akça, E. E. (2016). Doğrudan yabancı sermaye yatırımlarının belirleyicileri: seçilmiş doğu Asya ve pasifik ülkelerinden ampirik bulgular. Sosyoekonomi, 24(30), 91 - 112. doi: 10.17233/se.2016.10.005
  • Bayat, T., Kişman, Z. A. and Taşar, İ. (2018). The macroeconomic determinants of political stability in transition economies after collapse of Soviet Union. Cumhuriyet Üniversitesi İktisadi ve İdari Bilimler Dergisi, 19(1), 163 - 175.
  • Becker, R., Enders, W. and Lee, J. (2006). A stationarity test in the presence of an unknown number of smooth breaks. Journal of Time Series Analysis, 27(3), 381 - 409. doi:10.1111/j.1467-9892.2006.00478.x
  • Belke, M. and Özturgut, R. (2020). Doğrudan yabancı yatırımların ülkeye özgü belirleyicileri: yükselen piyasa ekonomileri için panel veri analizi. Akademik Araştırmalar ve Çalışmalar Dergisi (AKAD), 12(22), 12 - 26.
  • Bénassy‐Quéré, A., Coupet, M. and Mayer, T. (2007). Institutional determinants of foreign direct investment. World Economy, 30(5), 764 - 782. doi: 10.1111/j.1467-9701.2007.01022.x
  • Busse, M. and Carsten, H. (2007). political risk, institutions and foreign direct investment. European Journal of Political Economy, 23(2), 397 - 415. https://doi.org/10.1016/j.ejpoleco.2006.02.003
  • Christopoulos, D. K. and Leon-Ledesma, M. A. (2011). International output convergence, breaks, and asymmetric adjustment. Studies in Nonlinear Dynamics & Econometrics, 15(3). https://doi.org/10.2202/1558-3708.1823
  • Demez, S., Kızılkaya, F. and Turan, İ. (2019). NIC ülkelerinde politik istikrar ve ekonomik büyüme ilişkisi. Siirt Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 7(14), 485-499.
  • Dunning, J. H. (1979). Explaining changing patterns of international production: in defence of the eclectic theory. Oxford Bulletin of Economics and Statistics, 41(4), 269 - 295. https://doi.org/10.1111/j.1468-0084.1979.mp41004003.x
  • Dutta, N. and Roy, S. (2011). Foreign direct investment, financial development and political risks. The Journal of Developing Areas, 303(327).
  • Efeoğlu, R. and Pehlivan, C. (1998). Doğrudan yabancı sermaye yatırımlarının belirleyicileri: G-20 ülkelerinde bir uygulama. Fırat Üniversitesi Sosyal Bilimler Dergisi, 31(1), 289-300. https://doi.org/10.18069/firatsbed.730420
  • Emir, M., Uysal, M. and Doğru, B. (2013). Ülkenin risklilik durumu ile ülkeye gelen doğrudan yabancı yatırım arasındaki ilişki: Türkiye örneği. Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi, 27(2), 79 - 92.
  • Erkekoğlu, H. and Kılıçarslan, Z. (2016). Do political risks affect the foreign direct investment inflows to host countries? Journal of Business Economics and Finance, 5(2), 218 - 232. doi: 10.17261/Pressacademia.2016219263
  • Frey, B. S., Schneider, F. (1978). An empirical study of politico-economic interaction in the United States. The Review of Economics and Statistics, 174 - 183.
  • Jensen, N. and McGillivray, F. (2005). Federal institutions and multinational investors: federalism, government credibility and foreign direct investment. International Interactions, 31(4), 303 - 325. https://doi.org/10.1080/03050620500303365
  • Kariuki, C. (2015). The determinants of foreign direct investment in the African union. Journal of Economics, Business and Management, 3(3), 346 - 351. doi: 10.7763/JOEBM.2015.V3.207
  • Kaufmann, D., Kraay, A. and Zoido, P. (1999). Governance matters. Available at SSRN 188568.
  • Khan, M. M. and Akbar, M. I. (2013). The impact of political risk on foreign direct investment. International Journal of Economics and Finance, 5(8), 147 - 156.
  • Kızılkaya, O. and Kızılkaya, O. (2021). Türkiye’de politik istikrarın doğrudan yabancı yatırımlara etkisi: Fourier ADL eşbütünleşme testinden kanıtlar. Erciyes Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, (60), 571-587. doi: 10.18070/erciyesiibd.951065
  • Kim, H. (2010). Political stability and foreign direct investment. International Journal of Economics and Finance, 2(3), 59 - 71.
  • Kobrin, S. J. (1979). Political risk: a review and reconsideration. Journal of International Business Studies, 10(1), 67 - 80.
  • Kwiatkowski, D., Phillips, P.C. B., Schmidt, P. and Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: how sure are we that economic time series have a unit root? Journal of Econometrics, 54(1-3), 159 - 178.
  • Lee, H., Biglaiser, G. and Staats, J. L. (2014). The effects of political risk on different entry modes of foreign direct investment. International Interactions, 40(5), 683 - 710. https://doi.org/10.1080/03050629.2014.899225
  • Lucas, R. E. (1990). Why doesn’t capital flow from rich to poor countries? The American Economic Review, 80(2), 92 - 96.
  • McNown, R., Chung, Y. S. and Soo, K. G. (2018). Bootstrapping the autoregressive distributed lag test cointegration. Applied Economics, 50(13), 1509 - 1521. https://doi.org/10.1080/00036846.2017.1366643
  • Meldrum, D. (2000). Country risk and foreign direct investment. Business Economics, 35(1), 33 - 40.
  • Nasreen, S. and Anwar, M. A. (2014). Political risk and foreign direct investment: evidence from Pakistan economy. International Journal of Social and Economic Research, 4(1), 24 - 36. DOI : 10.5958/j.2249-6270.4.1.005
  • Nur, H. B. and Dilber, İ. (2017). Gelişmekte olan ülkelerde doğrudan yabancı yatırımları belirleyen temel unsurlar. Dokuz Eylül Üniversitesi İktisadi İdari Bilimler Fakültesi Dergisi, 32(2), 15 - 45.
  • Omay, T. (2015). Fractional frequency flexible Fourier form to approximate smooth breaks in unit root testing. Economics Letters, 134, 123-126. https://doi.org/10.1016/j.econlet.2015.07.010
  • Osabutey, E. L. C. and Okoro, C. (2015). Political risk and foreign direct investment in Africa: the case of the Nigerian telecommunications industry. Thunderbird International Business Review, 57(6), 417 - 429.
  • Özbay, F., Pehlivan, C. and Oğuztürk, B. S. (2020). Otomotiv ihracatının istihdam, doğrudan yabancı yatırımlar ve büyüme üzerindeki etkisi: Türkiye üzerine ekonometrik bir uygulama. Süleyman Demirel Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 25(4), 569-585.
  • Özcan, B. and Arı, A. (2010). Doğrudan yabancı yatırımların belirleyicileri üzerine bir analiz: OECD örneği. Ekonometri ve İstatistik e-Dergisi, 12, 65 - 88.
  • Pata, U. K. and Aydin, M. (2020). Testing the EKC hypothesis for the top six hydropower energy - consuming countries: evidence from Fourier bootstrap ARDL procedure. Journal of Cleaner Production, 264, 121699. https://doi.org/10.1016/j.jclepro.2020.121699
  • Pesaran, M. H., Shin, Y. and Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289 - 326. doi: 10.1002/jae.616
  • Quer, D., Claver, E. and Rienda, L. (2012). Political risk, cultural distance, and outward foreign direct investment: empirical evidence from large Chinese firms. Asia Pacific Journal of Management, 29(4), 1089 - 1104. doi: 10.1007/s10490-011-9247-7
  • Rafat, M. and Farahani, M. (2019). The country risks and foreign direct investment (FDI). Iranian Economic Review, 23(1), 235 - 260.
  • Sekkat, K. and Veganzones - Varoudakıs, M. A. (2004). trade and foreign exchange liberalization, investment climate and FDI in the MENA countries. Middle East and North Africa Working Paper, Working Paper Series, 39, 1- 27.
  • Sissani, M. and Belkacem, Z. (2014). The effect of political risk on foreign direct investment: the case of Algeria. Hyperion Economic Journal, 2(3), 29 - 35.
  • Tallman, S. B. (1988). Home country political risk and foreign direct investment in the United States. Journal of International Business Studies, 19(2), 219 - 234.
  • Tatar, H. E. (2020). Karadeniz ekonomik işbirliği bölgesinde altyapı sistemlerinin doğrudan yabancı yatırım girişlerine etkisi. Sakarya İktisat Dergisi, 9(3), 207-218.
  • Topaloğlu, E. E. and Korkmaz, T. (2021). Politik riskin doğrudan yabancı yatırımlar ve pay piyasası endeks getirilerine etkisi: G7 ülkeleri üzerine bir uygulama. Verimlilik Dergisi, 1, 97 - 115. doi: 10.51551verimlilik.654014
  • Yılancı, V., Bozoklu, Ş., Görüş and M. S. (2020). Are BRICS countries pollution havens? Evidence from a bootstrap ARDL bounds testing approach with a Fourier function. Sustainable Cities and Society, 55, 102035. https://doi.org/10.1016/j.scs.2020.102035

Volume 10, Issue 2, 2022


alphanumeric journal

Volume 10, Issue 2, 2022

Pages 187-196

Received: March 15, 2022

Accepted: Dec. 29, 2022

Published: Dec. 31, 2022

Full Text [512.5 KB]

  • Share

2022 Konat, G.

This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence, which permits unrestricted re-use, distribution, and reproduction in any medium, provided the original work is properly cited.

Creative Commons Attribution licence

scan QR code to access this article from your mobile device

Contact Us

School of Transportation and Logistics, Istanbul University
Avcilar Campus 34320 Avcilar/Istanbul/TURKEY

Bahadır Fatih Yıldırım, Ph.D.
+ 90 (212) 473 70 00 - 19263

alphanumeric journal

alphanumeric journal has been publishing as "International Peer-Reviewed Journal" every six months since 2013. alphanumeric serves as a vehicle for researchers and practitioners in the field of quantitative methods, and is enabling a process of sharing in all fields related to the operations research, statistics, econometrics and management informations systems in order to enhance the quality on a globe scale.