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

Tolga Omay, Bahar Takay Araz and Deniz Ilalan

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Terror; FDI, Smoot Transition Model (search for similar items in EconPapers)
JEL-codes: C22 F21 J18 (search for similar items in EconPapers)
Date: 2011-04-09
New Economics Papers: this item is included in nep-ara, nep-cwa and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:31015

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