Investment Hysteresis: An Empirical Essay Turkish Case

Koray Yıldırım, Neşe Algan and Harun Bal

Evaluation Review, 2024, vol. 48, issue 1, 143-176

Abstract: After the 2008 World Crisis, there is a view that the economic recovery has not been adequate. In this context, the debate on hysteresis and especially investment hysteresis has increased in the last decade. The aim of this study is to analyze the investment hysteresis and the basic dynamics of hysteresis in the Turkish economy. Structural break tests are used to identify hysteresis. Traditional and asymmetric causality tests are used to identify the fundamental dynamics of hysteresis. Investment, GDP, interest rate, and productivity variables are used to analyze investment hysteresis. Structural break tests were applied to the variables, while conventional and asymmetric causality tests were applied between investments and their determinants. Structural break tests prove the existence of hysteresis. According to the Granger causality test, there is no causality from interest rates, GDP and productivity to investments. The fact that interest rates have no effect on investments proves hysteresis. According to the asymmetric causality test, there is no relationship between interest rates and investments. There is an inverse relationship between GDP and investments. There is an asymmetric relationship between productivity and investments. The fact that productivity shocks cause asymmetric effects on investments makes productivity shocks the main dynamic of hysteresis. In addition, there is considerable evidence that the strong hysteresis and high uncertainty of TFP exacerbate investment hysteresis. Therefore, productivity shocks should be taken into account in policymaking for hysteresis.

Keywords: investment; hysteresis; structural breaks; asymmetric causality; E12; E22; L10 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:evarev:v:48:y:2024:i:1:p:143-176

DOI: 10.1177/0193841X231174754

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