When Stability Matters: Long-Run and Dynamic Effects of Public and Private Fixed-Capital Investments on Economic Growth in Turkey
When Stability Matters: Long-Run and Dynamic Effects of Public and Private Fixed-Capital Investments on Economic Growth in Turkey

Summary/Abstract: This study investigates the cointegration and causality relationships between public and private fixed capital investments and economic growth in Turkey during the 1988-2023 period, taking into account structural breaks in the cointegration relationship among the variables and allowing for time-varying causal relationships. The findings from the sharp-break Augmented ARDL approach confirm a long-term relationship between public and private fixed capital investments and economic growth. On the other hand, the positive impact of private fixed capital investments on growth tends to be more pronounced and permanent compared to public investments. The findings from the time-varying causality technique reveal that the causal relationships between public and private fixed capital investments and economic growth tend to fluctuate over time. Accordingly, the causal effect of public investments on growth is more pronounced in periods of macroeconomic stability. Besides, the causality from private investments to growth is more stable and persistent.

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