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

Omay, Tolga and Takay Araz, Bahar and Ilalan, Deniz (2011): The effects of terrorist activities on foreign direct investment: nonlinear Evidence.

Abstract

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Terror; FDI, Smoot Transition Model
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; F - International Economics > F2 - International Factor Movements and International Business > F21 - International Investment ; Long-Term Capital Movements; J - Labor and Demographic Economics > J1 - Demographic Economics > J18 - Public Policy

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