MALIYE DERGISI, vol.161, no.1, pp.283-297, 2011 (Refereed Journals of Other Institutions)
This study examines the relationship between physical investment and economic growth based on AK type endogenous growth model for Turkey during the period 1968-2006. AK type model which is one of the main endogenous growth models predicts increasing output growth rates as a result of permanent movements in the physical investment rate via spillover effects. For that purpose, following Jones (1995), we employ recent time series methods like unit root tests that allow structural breaks in the data and impulse-response, variance decomposition analysis within VAR method, which enable us make inferences about the existence of stochastic and deterministic trends in the series. Overall, the analysis of deterministic and stochastic trends in output growth and investment rates (in total investment, and in manufacturing, energy, and transportation investment expenditures) do not give support for the empirical validity of AK model. Our results show that AK type model is not valid for Turkey. That is, physical capital investments do not stimulate output growth in the long-run.