Foreign Financial Flows and Terrorism In Developing Countries

Amar Anwar and Mazhar Mughal

Working papers of CATT from HAL

Abstract: This study examines the differential response of various international financial flows to post 9/11 episode of terrorism in developing countries. Using monthly data for the period from January 2003 to June 2013, we employ ARMAX technique to analyze the impact of terrorism in Pakistan on the inflows of foreign direct investments (FDI), portfolio investments, migrant remittances and exports receipts. We find that FDI falls substantially as a result of terrorist activity, whereas portfolio investments and exports show little change. In contrast, migrant remittances show a significant increase. These differences are also visible among financial flows coming from major source regions and countries. The results are robust to use of alternative definitions and indicators of terrorism as well as the inclusion of various macroeconomic variables. These findings indicate that foreign private capital flees an economy suffering from terrorism whereas domestic producers stay put. Migrant remittances, however, are the only financial flows that rise in the time of difficulty.

Keywords: Remittances; Portfolio investment; Terrorism; 9/11; FDI; Exports; Developing countries; Pakistan (search for similar items in EconPapers)
Date: 2013-09
Note: View the original document on HAL open archive server: https://univ-pau.hal.science/hal-01885149v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://univ-pau.hal.science/hal-01885149v1/document (application/pdf)

Related works:
Working Paper: Foreign Financial Flows and Terrorism In Developing Countries (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpcatt:hal-01885149

Access Statistics for this paper

More papers in Working papers of CATT from HAL
Bibliographic data for series maintained by CATT - UPPA - Université de Pau et des Pays de l'Adour ().