Understanding The Factors That Affect Foreign Direct Investment in Turkey By Using MARS Method

Abstract

Increasing foreign direct investment amount is very significant especially for developing countries in order to improve economy. Because of this situation, defining the factors that affect foreign direct investment is essential. Within this context, the main purpose of this study is to identify the influencing factors of foreign direct investment in Turkey. Within this scope, annual data for the periods between 1988 and 2015 was analyzed in this study. In addition to this situation, Multivariate Adaptive Regression Splines (MARS) method was used so as to achieve this objective. According to the results of the analysis, it was determined that current account deficit problem of Turkey affects foreign direct invest negatively. It was identified that if the ratio of current account deficit to total GDP is higher than “3.57”, foreign direct investment goes down. This result shows that foreign investors do not prefer to make investment since current account deficit increases fragility in the economy and it is considered as the leading indicator of the economic crisis. While considering the results of this study, it was recommended that current account deficit problem should be minimized to attract foreign investors make investment in Turkey.