The Effect of Terrorist Incidents on Capital Flows
Current literature shows a significant negative impact of terrorism on countries economies. We explore this relationship in more detail. Using an unbalanced panel of over 160 countries for up to 25 years and the Global Terrorism Database (GTD) we show a decrease in FDI as a consequence of terrorism. We also find evidence that FDI flows are more sensitive to terrorism than either portfolio investments or external debt flows. Finally, we test the hypothesis that terrorism has negative spill-over effects on FDI flows into neighboring countries and find evidence that cultural but not geographical closeness matters.
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| Date of creation: | 2012 |
| Date of revision: | |
| Handle: | RePEc:ces:ceswps:_3998 |
| Contact details of provider: | Postal: Poschingerstrasse 5, 81679 Munich Phone: +49 (89) 9224-0 Fax: +49 (89) 985369 Web page: http://www.cesifo-group.de Email: More information through EDIRC
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References listed on IDEAS
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- Eckstein, Zvi & Tsiddon, Daniel, 2004.
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- de Sousa, José & Mirza, Daniel & Verdier, Thierry, 2010.
"Terrorism Networks and Trade: Does the Neighbor Hurt?,"
CEPR Discussion Papers
7946, C.E.P.R. Discussion Papers.
- José de Sousa & Daniel Mirza & Thierry Verdier, 2010. "Terrorism Networks and Trade: Does the Neighor Hurt?," Working Papers 2010-04, CEPII research center.
- De Sousa, José & Mirza, Daniel & Verdier, Thierry, 2010. "Terrorism Networks and Trade: Does the Neighbor Hurt?," CEPREMAP Working Papers (Docweb) 1017, CEPREMAP.
- Chen, Andrew H. & Siems, Thomas F., 2004. "The effects of terrorism on global capital markets," European Journal of Political Economy, Elsevier, vol. 20(2), pages 349-366, June.
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