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LOCATIONAL DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN AN EMERGING MARKET ECONOMY: EVIDENCE FROM TURKEY

ABSTRACT Over the past two decades, Turkey has recorded a substantial increase in the level of annual foreign direct investment (FDI) inflows. Building on the prior literature, this paper provides an empirical analysis of location-related determinants of FDI. This is undertaken by means of a co- integration analysis of major locational factors impacting upon the level of FDI inflows for the period 1980-1998. The evidence from this study supports the contention that while Turkey offers several location advantages to foreign investors in terms of market size, infrastructure, openness of the economy and market attractiveness, the lack of exchange rate and economic stability has hindered its efforts to harbor much higher volume of FDI.

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May 21, 2014