An Analysis of the Relationship between Foreign Direct Investment and Sustainable Development

Abstract

The development and welfare efforts of countries are transformed over time and creates sustainable development with an approach that considers environmental factors. If the processing of raw materials is based solely on economic benefits, it will hinder environmental and social development in the long run. Thus, the importance of sustainable development is emphasized once again with the circular economy structure. On the other hand, foreign direct investment (FDI) comes to the fore as sustainable development strategy, especially in developing economies. In this context, it is aimed to reveal whether there is a relationship between FDI and sustainable development in Turkey between 1990-2018. Unit root test, co-integration and VECM based causality analyses are included in the estimation of the relationships between these variables by using the Eviews10. The significance of causality relationship is also questioned with variance decomposition and impulse-response analysis. According to the findings, there is a cointegration relationship between the variables and they act together in the long run. In addition, there is one-way relationship from FDI to per capita GDP and per capita energy consumption; bidirectional causality between per capita GDP and per capita energy consumption; one-way relationship from FDI to sustainable development index.