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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| Length: | |
| Date of creation: | 2012 |
| Date of revision: | |
| Handle: | RePEc:ces:ceswps:_3998 |
| Contact details of provider: | Postal: Phone: +49 (89) 9224-0 Fax: +49 (89) 985369 Web page: http://www.cesifo.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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- Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic Consequences of Terror: Theory and the Case of Israel," CEPR Discussion Papers 4427, 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.
- 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.
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- Abadie, Alberto & Gardeazabal, Javier, 2005. "Terrorism and the World Economy," DFAEII Working Papers 2005-19, University of the Basque Country - Department of Foundations of Economic Analysis II.
- 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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