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The Impact of Political Risk on Foreign Direct Investment

Mashrur Mustaque Khan and Mashfique Akbar ()

MPRA Paper from University Library of Munich, Germany

Abstract: Political risk, like all other risks, has an adverse effect on any economy. Even though other forms of risk, such as economic risk and financial risk have been studied quite extensively, political risk has not received much attention owing primarily to lack of data. The current paper attempts to study a negative and significant relationship between political risk and Foreign Direct Investment (FDI), accounting for 94 countries over a span of 24 years from 1986-2009. It was found that most of the political risk indicators have a negative relationship with FDI for the world as a whole and also, the high-income countries but the relationship was the strongest for the upper middle-income countries.

Keywords: Political risk; Foreign Direct Investment; Panel Data Analysis (search for similar items in EconPapers)
JEL-codes: C33 F21 P48 (search for similar items in EconPapers)
Date: 2013-05-30
New Economics Papers: this item is included in nep-pol
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