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The Impact of Armed Conflict on Inward Foreign Direct Investment (FDI): An Analysis of Conflict Over Government, Conflict Over Territory, and FDI

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  • Miao Grace Wang
  • M.C. Sunny Wong
  • Hong Zhuang
  • Reinhard Cate

Abstract

We examine the relationship between armed conflict and foreign direct investment (FDI) in host countries. With data from 113 nations from 1984 to 2014, system GMM and macro-panel CCEMG estimators show that intrastate armed conflict decreases FDI in conflict-ridden hosts. Further, we distinguish two types of armed conflict – conflict over government and conflict over territory. Conflict over government has significant short-term and long-term negative impacts on FDI, while the effect of territorial conflicts appears insignificant. Our results also suggest that armed conflict's harmful impact on FDI mainly occurs in middle- and low-income host countries.

Suggested Citation

  • Miao Grace Wang & M.C. Sunny Wong & Hong Zhuang & Reinhard Cate, 2024. "The Impact of Armed Conflict on Inward Foreign Direct Investment (FDI): An Analysis of Conflict Over Government, Conflict Over Territory, and FDI," Global Economic Review, Taylor & Francis Journals, vol. 53(1), pages 25-51, January.
    • Handle: RePEc:taf:glecrv:v:53:y:2024:i:1:p:25-51
    DOI: 10.1080/1226508X.2024.2305468
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