Title: Uncovering the channels through which FDI affects current account: the case of Turkey

Authors: A. Yasemin Yalta

Addresses: Department of Economics, Hacettepe University, Ankara 06800, Turkey

Abstract: In this paper, we argue that foreign direct investment (FDI) flows can have an effect on current account through three different channels: exports, imports, and profit remittances. By identifying the response differentials of these variables to a change in FDI flows employing a Vector Autoregression (VAR) model, we provide evidence for the current-account disturbing effects of FDI. Our findings suggest that profit remittances complicate the relationship between FDI and current account, and therefore should be taken into consideration in formulating policies concerning FDI flows.

Keywords: foreign direct investment; FDI flows; current account; exports; imports; profit remittances; Turkey.

DOI: 10.1504/IJEPEE.2012.048500

International Journal of Economic Policy in Emerging Economies, 2012 Vol.5 No.2, pp.158 - 167

Received: 07 Jun 2011
Accepted: 12 Mar 2012

Published online: 12 Aug 2012 *

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