The Effect of Terrorist Incidents on Capital Flows

Randall Filer and Dragana Stanisic

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: The 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.

Keywords: capital flow; terrorism; FDI; spill-over effect (search for similar items in EconPapers)
JEL-codes: D74 H56 (search for similar items in EconPapers)
Date: 2013-01
New Economics Papers: this item is included in nep-geo, nep-ifn and nep-opm
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Related works:
Journal Article: The Effect of Terrorist Incidents on Capital Flows (2016)
Working Paper: The Effect of Terrorist Incidents on Capital Flows (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp480

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