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The effects of terrorist activities on foreign direct investment: nonlinear Evidence

  • Omay, Tolga
  • Takay Araz, Bahar
  • Ilalan, Deniz

In this study, we examine the relationship between foreign direct investment and terrorist incidents that took place in Turkey for the period from 1991:12 to 2003:12. This research contributes to the literature by checking for a possible non-linear relationship between terrorism and foreign direct investment. The data used to measure the intensity of terrorism were collected from the newspapers of Turkey, and therefore are limited to the direct signals given to the market. Empirical evidence from both linear and non-linear models confirms that terrorism has a large significant negative impact on foreign direct investment. With respect to the nonlinear model, the impact of terrorism on the foreign direct investment is more severe during periods of high terrorism when the intensity of terrorism passes the threshold level 3.725.

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File URL: https://mpra.ub.uni-muenchen.de/31015/1/MPRA_paper_31015.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31015.

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Date of creation: 09 Apr 2011
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Handle: RePEc:pra:mprapa:31015
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  1. Eitrheim, Oyvind & Terasvirta, Timo, 1996. "Testing the adequacy of smooth transition autoregressive models," Journal of Econometrics, Elsevier, vol. 74(1), pages 59-75, September.
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