Does terrorism hamper FDI inflows? A pre and post 9/11 analysis

Author:

Arif ImtiazORCID,Rawat Amna SohailORCID,Khan Lubna

Abstract

PurposeThis research intends to determine the role of terrorism in defying foreign direct investment (FDI) in top terror effected economies.Design/methodology/approachPanel data on FDI and terrorism from top terror effected economies spanning from 1987 to 2018 were used and the relationship for whole sample was investigated. Later the sample period was divided into pre (1987–2001) and post 9/11 (2002–2018) subsample and same relationship was tested to investigate the normalization of terror effect on FDI. The method of Pooled Mean Group (PMG) was used to test the hypothesis.FindingsThe results showed a negative but statistically insignificant impact of terrorism on the FDI inflows in the long run. Later the sample period was divided into pre (1987–2001) and post 9/11 (2002–2018) subsample. The empirical estimates for pre and post 9/11 periods indicated a negative and statistically significant relationship between terrorism and FDI for pre 9/11 period, and a negative but statistically insignificant relationship between the two variables for post 9/11 period.Originality/valueThe findings suggest several important policy implications for the terror affected countries and are further discussed in the study.

Publisher

Emerald

Subject

General Economics, Econometrics and Finance

Reference65 articles.

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