Foreign Capital Inflows and Domestic Savings in Turkey
Foreign Capital Inflows and Domestic Savings in Turkey

Author(s): Özcan Karahan
Subject(s): National Economy, Business Economy / Management, Economic history, International relations/trade, Transformation Period (1990 - 2010), Present Times (2010 - today)
Published by: Masarykova univerzita nakladatelství
Keywords: Capital Inflows; savings; ARDL Model;
Summary/Abstract: Since a high level of financial funding is needed to stimulate investment and thus enhance economic growth, most of the developing countries have sought to attract foreign capital to their financial system. Accordingly, after the implementation of different policies aiming the country to be attractive for foreign funds, Turkey have attracted huge financial capital to the own economy over the last decades. This study aims to determine the impact of capital inflows on total saving in Turkey by using ARDL Bound Testing Approach for quarterly data between 2002 and 2018. Empirical findings indicated that capital inflows to Turkey could not create the positive effect on total saving as much as expected from them. This is because foreign funds provided by capital inflows to Turkey had a substitution effect rather than completing domestic savings in the Turkish Economy. This result also shows that external dependence and thus fragility of financial markets in Turkey have significantly increased. Therefore, it is necessary to give priority to policies related to the management of capital inflows in order to ensure financial stability and achieve sustainable growth in Turkey.

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