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FDI and Terrorism in the developing Asian countries: A panel data analysis

Listed author(s):
  • Kechagia, Polyxeni
  • Metaxas, Theodore

Foreign Direct Investment (FDI) inflows are distributed among the geographical regions and play a crucial role on the social, political and financial condition of the recipient country. Certain areas manage to attract more FDI and therefore underdeveloped, developing and transition economies make efforts so as to absorb increased FDI inflows and to improve the political and socioeconomic conditions, focusing on the political stability, the external conflicts and the terrorist attacks. The purpose of the present paper is to empirically investigate and discuss the correlation between FDI inflows and terrorism in the developing Asian countries during the period 1996 – 2015. We aim at evaluating the impact of terrorism on the FDI inflows in the Asian developing economies, taking into consideration that they ranked first among the top FDI recipient countries in 2015, focusing on the cases of 5 countries of the region. We conduct a literature review on previous empirical studies and we present an empirical model to investigate the interaction between terrorist attacks and FDI inflows, using a panel data analysis. We argue that terrorism has a negative impact on the FDI inflows of the studied countries. The contribution of the essay refers to the fact that it includes both fatalities and injuries occurring from international terrorist attacks and it is not limited solely on the case of a single country.

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File URL: https://mpra.ub.uni-muenchen.de/80945/1/MPRA_paper_80945.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 80945.

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Date of creation: Jun 2017
Handle: RePEc:pra:mprapa:80945
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  1. Gupta, Sanjeev & Clements, Benedict & Bhattacharya, Rina & Chakravarti, Shamit, 2004. "Fiscal consequences of armed conflict and terrorism in low- and middle-income countries," European Journal of Political Economy, Elsevier, vol. 20(2), pages 403-421, June.
  2. Kazunobu Hayakawa & Fukunari Kimura & Hyun-Hoon Lee, 2013. "How Does Country Risk Matter for Foreign Direct Investment?," The Developing Economies, Institute of Developing Economies, vol. 51(1), pages 60-78, 03.
  3. Fathi Ali & Norbert Fiess & Ronald MacDonald, 2010. "Do Institutions Matter for Foreign Direct Investment?," Open Economies Review, Springer, vol. 21(2), pages 201-219, April.
  4. Christian Daude & Ernesto Stein, 2007. "The Quality Of Institutions And Foreign Direct Investment," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 317-344, November.
  5. Khan, Mashrur Mustaque & Akbar, Mashfique Ibne, 2013. "The Impact of Political Risk on Foreign Direct Investment," MPRA Paper 47283, University Library of Munich, Germany.
  6. Muhammad Ullah & Kazuo Inaba, 2014. "Liberalization and FDI Performance: Evidence from ASEAN and SAFTA Member Countries," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 3(1), pages 1-24, December.
  7. Omay Tolga & Araz-Takay Bahar & Eruygur Ayşegül & Kiliç Ilker, 2013. "The Effects of Terrorist Activities on Foreign Direct Investment: Nonlinear Evidence from Turkey," Review of Economics, De Gruyter, vol. 64(2), pages 139-158, August.
  8. Younas, Javed, 2009. "Does institutional quality affect capital mobility? Evidence from developing countries," Journal of Institutional Economics, Cambridge University Press, vol. 5(02), pages 207-223, August.
  9. Enders, Walter & Sandler, Todd, 1996. "Terrorism and Foreign Direct Investment in Spain and Greece," Kyklos, Wiley Blackwell, vol. 49(3), pages 331-352.
  10. Sultan Mehmood, 2014. "Terrorism and the macroeconomy: Evidence from Pakistan," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(5), pages 509-534, October.
  11. Buchanan, Bonnie G. & Le, Quan V. & Rishi, Meenakshi, 2012. "Foreign direct investment and institutional quality: Some empirical evidence," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 81-89.
  12. Abel Ebeh Ezeoha & John Okereke Ugwu, 2015. "Interactive Impact of Armed Conflicts on Foreign Direct Investments in Africa," African Development Review, African Development Bank, vol. 27(4), pages 456-468, December.
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