Determinants of Economic Growth in Türkiye: Analysis of Human Development, Gross Fixed Capital Formation and Trade Openness with ARDL Bounds Test

Abstract

The aim of this study is to empirically examine the relationship between economic growth and human development, gross fixed capital formation, and trade openness in Turkey during the period 1990–2023. The Autoregressive Distributed Lag (ARDL) bounds test approach was used to determine the long-term cointegration relationship between the variables. In the model, economic growth (LNGDP) is considered the dependent variable; Human Development Index (HDI), Gross Fixed Capital Formation (GFCF), and Trade Openness (TRADE) are considered as explanatory variables. The findings indicate the existence of a long-term cointegration relationship between the variables. According to the long-term ARDL estimation results, the effects of human development, gross fixed capital formation, and trade openness on economic growth are positive and statistically significant. The error correction coefficient (ECt-1 =-0.807) is quite strong and statistically significant. This is significant as it indicates that approximately 80.7% of short-term disequilibria are corrected within a single period, leading to a rapid return to long-term equilibrium. The Granger causality test results, however, indicate that there is no Granger causality from HDI, GFCF, and TRADE variables to economic growth; In contrast, studies reveal a statistically significant causal relationship between economic growth, human development, and gross fixed capital formation, and trade openness.