Sustainability of Turkish-Greek Relations in Political Economy: Time Series Analysis
Sustainability of Turkish-Greek Relations in Political Economy: Time Series Analysis

Summary/Abstract: Türkiye and Greece are neighboring countries that, despite their shared cultural heritage, experience tension from time to time due to political disagreements and historical prejudices. This study aims to evaluate Turkish-Greek relations by considering them within the political economy framework. Long-term relationships between energy imports, foreign direct investments and defense expenditures for the two countries were examined using Johansen cointegration and Granger causality tests. Economic relations are not realized at the potential level due to strategic disagreements and efforts to dominate the Eastern Mediterranean and the Aegean Sea. While a single cointegration relationship was found among the variables examined in Türkiye, three cointegration relationships were found in Greece. Granger causality tests revealed that energy imports in Türkiye were caused by foreign direct investments and a bidirectional causality relationship was found between defense expenditures and foreign direct investments. Bidirectional causality was found between defense expenditures and foreign direct investments in Greece.

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