Examination of the relationship between fixed capital investment and gross domestic product in Turkey: the example of agricultural sector in the presence of multi structural breaks

Sönmez H.

in: Analysis of Economics Applications, Savaş DURMUŞ, Editor, Yaz Yayınları, Afyonkarahisar, pp.99-121, 2023

  • Publication Type: Book Chapter / Chapter Vocational Book
  • Publication Date: 2023
  • Publisher: Yaz Yayınları
  • City: Afyonkarahisar
  • Page Numbers: pp.99-121
  • Editors: Savaş DURMUŞ, Editor
  • Dokuz Eylül University Affiliated: Yes

Abstract

Economies are based on capital accumulation in fixed capital investments. The accumulation of capital is expected to contribute positively to economic growth as production and employment increase. The aim of this study is to investigate the relationship between agricultural fixed capital investments and agricultural gross domestic product in Turkey from 1999 to 2021, which considers multiple structural breaks. The stationarity of the variables has been examined for the first time using the Bai-Perron multiple structural break unit root test approach in addition to traditional unit root tests, which differs from other studies. Three different structural break dates have been identified in the study, and the findings have been evaluated in four different regime periods. As a result of the study, a positive and significant relationship between agricultural fixed capital investments and agricultural gross domestic product has been found in the first three regime periods. In the first three regime periods, a 1% increase in agricultural fixed capital investments increased agricultural gross domestic product by approximately 0.260%, 0.054%, and 0.565%, respectively. Furthermore, the positive effect of agricultural fixed capital investments on agricultural gross domestic product is highest in regime 3. However, contrary to theoretical expectations a 1% increase in agricultural fixed capital investments reduces agricultural gross domestic product by 0.09% in regime 4. The study concludes that the impact of fixed capital investments in the agricultural sector on agricultural gross domestic product varies in direction and magnitude in different regime periods. It is considered necessary for Turkey, which aims to evaluate its potential in the agricultural sector sustainably and competitively, to promote technological innovations, prioritize infrastructure improvements to increase agricultural productivity, and implement education and skill development programs.