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Abstract:
Economic growth and development are based on investments which are funded by savings. Therefore, the presence of a relationship between savings and investments is important for the designation of economic policies. Feldstein-Horioka (1980) described the presence of a savings-investment relationship according to the degree of freedom of international capital movements. Hence, the presence of limitations on capital movements indicates a strong relationship between savings and investments while the contrary demonstrates that such relationship has weakened. In other words, in case of restriction of international capital movements in the economy of a country, this leads to a rise in the transformation rate of savings into investments. This study is conducted in order to designate the relationship between savings and investments in Turkey with an ARDL approach on the data relating to the period 1980-2015 within the framework of the Feldstein-Horioka Hypothesis. Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) have been utilized as unit root tests and the co-integration relationship has been investigated with the ARDL Bound Test. Consequently, estimates relating to short and long-term coefficients have been included. Based on the findings obtained from the analysis, it has been concluded that there is a long-term relationship between savings and investments in Turkey and that the Feldstein-Horioka Hypothesis is applicable for the Turkish economy in the period analyzed.
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