ANALYSIS OF THE RELATIONSHIP BETWEEN FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH FROM A FINANCIAL DEVELOPMENT PERSPECTIVE: THE CASE OF TURKIC STATES

Abstract

Aim: This study aims to examine the economic growth processes and the role of foreign direct investments in economic development in Turkic states located in the Central Asia and Caucasus region, such as Turkey, Turkmenistan, Azerbaijan, Tajikistan, Kazakhstan, Uzbekistan, and Kyrgyzstan. Method: Annual data for the period 2003-2022 were analyzed using the panel data method, focusing on the variables of GDP and FDI. Model selection was conducted using the Limited F-Test, Likelihood Ratio Test, and the Hausman Test. Issues such as changing variances, autocorrelation, and inter-unit correlation were addressed during the analysis. The model was estimated with robust standard errors. Results: The analysis revealed that FDI has a positive and significant impact on economic growth. Additionally, the analysis showed that the GDP of Kazakhstan and Turkey is higher than that of other countries in the region. Conclusion: It is evident that Kazakhstan and Turkey stand out as economically dominant countries in the region, possessing stronger economies compared to others. These two countries have more successful economic growth and investment attraction policies compared to the rest. This study is important in understanding the economic growth processes of Turkic states in the Central Asia and Caucasus region and highlighting the role of foreign direct investments in economic development. The findings can provide guidance for the formulation of economic policies and the development of strategies to attract investments in these countries. Therefore, it is considered that similar analyses for other countries and increased regional cooperation and investments could be based on these findings.