The relationship between high-tech exports and foreign dırect investments: empirical evidence from Turkey

Abstract

The objective of this study is to explore the impact of high-technology exports on foreign direct investments. The study uses annual data covering the period 1995-2015. The case of Turkey is investigated taking into account the fact that both, foreign direct investments and high-technology exports, are increasing sharply. High-technology exports and foreign direct investments separately gain large attention among research community, however the research on the relationship between them is lacking. For this purpose, several econometric methods including Johansen cointegration test and ARDL approach are employed to investigate the long-run causal linkages and short-run dynamics between the economic terms of interest. In order to test for the stability of the model, the impact of economic freedom is controlled. The results of Johansen cointegration test indicate the existence of cointegration between the variables of interest. This is confirmed by both, trace and max statistics. Furthermore, the results of ARDL model indicate a significant positive short- and long-run impact of high-technology exports on foreign direct investments. The introduction of control variable in extended model does not change the sign and the significance of the original results. Therefore, the selected model can be considered stable.