Macroeconomic Indicators, Government Quality, and Financial Markets as Determinants of Turkish FDI Inflows

Abstract

This study analyzes the determinants of Foreign Direct Investment (FDI) inflows in Turkey across quarterly observations. Using a quantitative approach with the Autoregressive Distributed Lag (ARDL) model, this paper investigates the dynamic impacts of interest rates, economic growth, exchange rates, government index, and stock market performance. The long-run empirical results indicate that exchange rates exert a significant negative effect, while government index and stock market development show significant positive impacts on FDI. Conversely, interest rates and gross domestic product demonstrate no statistical significance. These findings imply that foreign investors prioritize government quality and financial market depth over nominal macroeconomic indicators. Policymakers should focus on structural strengthening and currency stability to sustain capital inflows.