Structural and Financial Determinants in the Development of the Aviation Sector: Evidence from Türkiye
by HAVADER Editör Ekibi
Growth in a sector is often assumed to require foreign investment — a simple equation of "foreign capital comes in, the sector grows." But this study shows that equation doesn't always hold, at least not for Turkey's aviation sector.
The goal was to examine the structural and financial determinants of passenger and freight transport in aviation using annual data from 1993 to 2023. Two separate models — one for passenger (PAX), one for freight (FRE) transport — were built in a semi-logarithmic framework, analyzing long-run cointegration via the ARDL Bounds Test and causality via the Fourier Toda-Yamamoto test, which accounts for structural breaks.
The findings are fairly striking: domestic credit expansion (DCREDIT) and market valuations (MCAP) play a dominant role in long-term growth for both passenger and freight models. The value-added of machinery and transport equipment manufacturing was also found positive and significant in both models, while foreign direct investment (FDI), contrary to expectations, failed to trigger structural expansion in air transport development.
What this study contributes is questioning the common assumption that "foreign investment always drives growth." An everyday analogy: it's similar to a family expanding their home not by waiting for money from an outside investor, but by taking out a loan from their own bank and using their own savings — growth driven by mobilizing internal financial resources rather than external money.
In the end, this research sends policymakers a clear message: a strategy aimed at growing Turkey's aviation sector should prioritize strengthening domestic credit mechanisms and local manufacturing capacity (particularly machinery and equipment) rather than focusing on attracting foreign investment. The error correction model results also show short-run shocks converge back to long-run equilibrium at a statistically significant speed.
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The goal was to examine the structural and financial determinants of passenger and freight transport in aviation using annual data from 1993 to 2023. Two separate models — one for passenger (PAX), one for freight (FRE) transport — were built in a semi-logarithmic framework, analyzing long-run cointegration via the ARDL Bounds Test and causality via the Fourier Toda-Yamamoto test, which accounts for structural breaks.
The findings are fairly striking: domestic credit expansion (DCREDIT) and market valuations (MCAP) play a dominant role in long-term growth for both passenger and freight models. The value-added of machinery and transport equipment manufacturing was also found positive and significant in both models, while foreign direct investment (FDI), contrary to expectations, failed to trigger structural expansion in air transport development.
What this study contributes is questioning the common assumption that "foreign investment always drives growth." An everyday analogy: it's similar to a family expanding their home not by waiting for money from an outside investor, but by taking out a loan from their own bank and using their own savings — growth driven by mobilizing internal financial resources rather than external money.
In the end, this research sends policymakers a clear message: a strategy aimed at growing Turkey's aviation sector should prioritize strengthening domestic credit mechanisms and local manufacturing capacity (particularly machinery and equipment) rather than focusing on attracting foreign investment. The error correction model results also show short-run shocks converge back to long-run equilibrium at a statistically significant speed.