The analysis of the economic relationship between an emerging economy Turkey and Small Island Northern Cyprus: Rulıng political parties, their ideologies and foreign aid

Abstract

This study investigates the effect of political alignment of ruling parties of Turkey and TRNC on the foreign aid from Turkey to TRNC. Depending on the stationarity of the variables ARDL approach is used to examine the relationship between political cohesion between ruling parties and the foreign aid to TRNC for the period from 1983 to 2017. According to the results, it is found out that a long-run relationship exists between foreign aid and alignment of ruling parties of two countries. The findings suggest that, when the ruling parties of two countries have similar political view, the foreign aid from Turkey to TRNC significantly increases, even after controlling GDP per capita of TRNC, inflation of TRNC, government expenditure of Turkey and economic crisis effect.