DOMESTIC CREDIT, FOREIGN DIRECT INVESTMENT AND R&D EXPENDITURE: LONG-RUN RELATIONSHIPS WITH INFLATION IN TÜRKIYE
Abstract
Inflation has been a common subject in economics discussions due to its harmful consequences. However, while there are many studies exploring how inflation influences financial development, the discipline of finance ought to thoroughly investigate the connection between inflation and financial growth. There are few studies that consider the effects of financial development on inflation. This research seeks to examine the effects of financial development and innovation activities on Turkey's inflation from 1990 to 2021. The study uses domestic credit and foreign direct investment as measures of financial development. Innovation activities are represented in the model through research and development expenditures. The ARDL model is utilized for analysis. The results indicate that foreign direct investments, domestic loans, and research and development spending have a positive impact on inflation. The empirical results highlight the significance of effective financial market operations over merely the size of financial markets, as well as the alignment of innovation activities with the structure of the economy in combating inflation. These findings are valuable for policymakers addressing inflation challenges.
Keywords
Inflation, Financial Development, Research and Development Expenditures, ARDL Model
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