Determinants of foreign direct investment: A comparative analysis of Turkey and Poland

There exists vast literature on the determinants and effects of Foreign Direct Investment (FDI). The issue has increased in importance due to strong globalization processes. Many developed and developing countries try to attract FDI to support their economic growth and development. However, empirical results show an ambiguous relation between FDI and economic growth. In this article, the determinants of FDI in Poland and Turkey are compared based on monthly data from 2000-2009 with help of the Granger causality test and the Vector Auto-regression Model. It is concluded that FDI inflows are positively correlated with market size and openness of the economy in Poland. For Turkey, a bidirectional relationship between FDI and market size as well as between FDI and openness of the economy has been observed. No relation between FDI and inflation has been found.