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Aid in Modulating the Impact of Terrorism on FDI: No Positive Thresholds, No Policy

Simplice Asongu (), Uchenna Efobi and Ibukun Beecroft

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate how foreign aid dampens the effects of terrorism on FDI using interactive quantile regressions. The empirical evidence is based on 78 developing countries for the period 1984-2008. Bilateral and multilateral aid variables are used, while terrorism dynamics entail: domestic, unclear, transnational and total number of terrorist attacks. The main finding is that foreign aid cannot be used as a policy tool to effectively address a hypothetically negative effect of terrorism on FDI. The positive threshold we cannot establish is important for policy makers because it communicates a cut-off point at which foreign aid completely neutralizes the negative effect of terrorism on FDI. From the conditioning information set, we also establish for the most part that the effects of GDP growth, infrastructural development and trade openness are an increasing function of FDI. Policy implications are discussed.

Keywords: FDI; Foreign aid; Terrorism; Quantile regression (search for similar items in EconPapers)
JEL-codes: C52 D74 F23 F35 O40 (search for similar items in EconPapers)
Date: 2017-01, Revised 2017-09
New Economics Papers: this item is included in nep-int
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Related works:
Working Paper: Aid in Modulating the Impact of Terrorism on FDI: No Positive Thresholds, No Policy (2017) Downloads
Working Paper: Aid in Modulating the Impact of Terrorism on FDI: No Positive Thresholds, No Policy (2017) Downloads
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