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.
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 *