The relevance of political stability and exports on Türkiye’s outward direct investment in the European Union: panel quantile regression approach

Abstract

ABSTRACT This study examines the factors that affect Türkiye’s outward foreign direct investment (TODI) in European Union (EU) countries across quantiles using a panel quantile regression to understand the factors that affect TODI in EU countries with the most and least direct investment from Türkiye. We document that determinants of TODI in EU countries show significant discrepancies across quantiles. Mainly, we find that the relationship between the political stability (PS) level in EU countries and TODI is positive and also stable across quantiles. We also see a strong positive and monotonically declining relationship between Türkiye’s trade exports (EXP) and TODI. On the other hand, we do find that host country market size is negatively related to TODI with a declining slope across quantiles while labour resource endowments are positively related with a small variance across quantile. Overall, we provide policymakers with further information about the growing level of TODI in EU countries. Mainly, we recommend policy makers to make effective use of the relevant trade facilitation clauses in the EU customs union, expand the scale of Türkiye’s trade exports to EU countries, deepen political relations, and strengthen reciprocal political trust.