Terrorist Incidents and Foreign Direct Investment: Results Uncovered by Relational Models in the Case of Colombia and Peru
DOI:
https://doi.org/10.60758/1pt3q649Keywords:
Colombia, Foreign direct investment, Peru, Terrorist incidentsAbstract
This paper seeks to examine if there is a causal link between terrorist incidents and foreign direct investment in the cases of Colombia and Peru, using large-scale and up-to-date data. The data of both parameters from the early 1970s to 2020 are involved in the analysis. The statistical characteristics of the variables entail different relational models for the examination. While the data concerning Colombia necessitate the Toda-Yamamoto test, the data concerning Peru require robust regression analysis. The Toda-Yamamoto test indicates no causality between the variables concerning Colombia. On the other hand, robust regression analysis crystallizes for Peru that there is a causality from foreign direct investment to terrorist incidents and a causality tendency from terrorist incidents to foreign direct investment. Theoretically, the results reveal that the variables do not enable establishing a causal relationship for all countries.
References
Ak, M. Z. and V. Inal (2017), “Türkiye’de terör ve doğrudan yabancı yatırım: Saklı eşbütünleşme ve asimetrik nedensellik ilişkisi.” Bilgi, 35, 27-43.
Altay, H., A. Ekinci and M. A. Pece (2013), “Economic effects of terrorism in the Middle East: A review on Türkiye, Egypt and Saudi Arabia.” Dumlupinar Sosyal Bilimler Dergisi, 37, 267-288.
Anderson, H. M. and F. Vahid (1998), “Testing multiple equation systems for common nonlinear components.” Journal of Econometrics, 84, 1–36.
Ari, Y. O. and B. Ibrahim (2021), “The impact of terrorism on foreign direct investment: The case of Turkey [Turkiye].” Third Sector Social Economic Review, 56, 1781-1797.
Aslanargun, A., B. Yazici, M. Kantar, B. Senoglu, and I. Usta (2018), Statistics I. In Agaoglu, E., Atlas, M. (Eds.) Anadolu University Press, Eskisehir.
Bandyopadhyay, S. and J. Younas (2014), “Terrorism: A threat to foreign direct investment.” Federal Reserve Bank of St. Louis. Available at https://www.stlouisfed.org/publications/regional-economist/october-2014/terrorism-a-threat-to-foreign-direct-investment.
Bandyopadhyay, S., T. Sandlery, and J. Younas (2014), “Foreign direct investment, aid, and terrorism.” Oxford Economic Papers, 66, 25-50.
Bildirici, M. (2018), “The relation among terrorism, FDI and energy consumption: The events from Turkey [Türkiye].” ResearchGate. https://www.researchgate.net/publication/324204027_The_ Relation_among_Terrorism_FDI_and_ Energy_ Consumption_The_Events_from_Turkey.
Bojanic, N. A. (2014), “The effect of coca and FDI on the level of corruption in Bolivia.” Latin America Economic Review, 23, 10-23.
Camacho, A. and C. Rodrigues (2012), “Firm exit and armed conflict in Colombia.” Journal of Conflict Resolution, 57, 89-116.
Ceyhan, V. and O. Gunduz (2019), “Vector auto regression models.” OMU. https://avys.omu.edu.tr/storage/app/public/vceyhan/109840/VAR.pdf.
Clutterbuck, R. (1995), “Peru: Cocaine, terrorism and corruption.” International Relations, 12, 77-92.
Colak, E., H. K. Aksoy, F. Er, and D. Tunali (2019), Statistics 2. In Er, F., Sonmez, H. (Eds.) Anadolu University Press, Eskisehir.
Enders, W., A. Sachsida and T. Sandler (2006), “The impact of transnational terrorism on U.S. foreign direct investment.” Political Research Quarterly, 59, 517-531.
Enders, W. and T. Sandler (1996), “Terrorism and foreign direct investment in Spain and Greece.” Kyklos, 49, 331-352.
EVIEWS (2018), “Robust Regression in EViews 8.” Eviews. Available at https://eviews.com/EViews8/ ev8ecrobust_n.html.
Fielding, D. and A. Shortland (2012), “The dynamics of terror during the Peruvian civil war.” Journal of Peace Research, 49, 847-862.
Filer, R. K. and D. Stanisic (2016), “The effect of terrorist incidents on capital flows.” Review of Development Economics, 20, 502-513.
Garces, L. (2005), “Colombia: The link between drugs and terror.” The Journal of Drug Issues, 35, 83-106.
Greenacre, M., E. Colak, B. K. Kilinc, E. G. Kumtepe, G. Arslan, and H .K. Aksoy (2018), Statistics 1. In Er, F., Sonmez, H. (Eds.) Anadolu University Press, Eskisehir.
GTD (2022a), “Colombia-terrorist incidents by country.” University of Maryland.
GTD (2022b), “Peru-terrorist incidents by country.” University of Maryland.
Gulgun, C. (2021), “Toda-Yamamoto nedensellik testi.” Youtube. https://www.youtube.com/ watch?v=2kg2oW3rA5k.
Guris, S., E. C. Akay and B. Guris (2017), Basic Econometry with EViews. Der Publications, Istanbul.
Jaitman, L. (2019), “Frontiers in the economics of crime: Lessons for Latin America and the Caribbean.” Latin America Economic Review, 28, 2-36.
Jebli, M. B., S. B. Youssef, and N. Apergis (2019), “The dynamic linkage between renewable energy, tourism, CO2 emissions, economic growth, foreign direct investment, and trade.” Latin America Economic Review, 28, 2-19.
Kang, S. J. and H. S. Lee (2007), “Terrorism and FDI flows: Cross-country dynamic panel estimation.” Korea Institute of International Economic Policy, 1, 59-99.
Kapetanios, G., Y. Shin and A. Snell (2003), “Testing for unit root in the nonlinear STAR framework.” Journal of Econometrics, 112, 359-379.
Kinyanjui, S. (2014), “The impact of terrorism on foreign direct investment in Kenya.” International Journal of Business Administration, 5, 148-157.
Lanouar, C. and U. Shahzad (2020), “Terrorism and capital flows: The missed impact of terrorism in big cities.” Applied Economics Letters, 1-8.
Li, Q. (2006), “Political violence and foreign direct investment.” In Regional Economic Integration, edited by Michele Fratianni. Bingley: Emerald Group Publishing Limited, 225–49.
Lutz, J. M. and B. J. Lutz (2006), “International terrorism in Latin America: Effects on foreign direct investment and tourism.” The Journal of Social, Political and Economic Studies, 31, 321-338.
Luukkonen, R., P. Saikkonen and T. Terasvirta (1988), “Testing linearity against smooth transition autoregressive models.” Biometrica, 75, 491-499.
Omay, T., B. A. Takay, A. Eruygur and I. Kilic (2013), “The effects of terrorist activities on foreign direct investment: Nonlinear evidence from Turkey [Turkiye].” Review of Economics, 64, 139-158.
Ozmen, A., E. Siklar, H. Durucasu, M. Atlas, and F. Er (2019), Statistics II. In Siklar, E., Ozdemir, A. (Eds.) Anadolu University Press, Eskisehir.
Polyxeni, K. and M. Theodore (2019), “An empirical investigation of FDI inflows in developing economies: Terrorism as a determinant factor.” The Journal of Economic Asymmetries, 20, 1-15.
Powers, M. and S.W. Choi (2012), “Does transnational terrorism reduce foreign direct investment? Business-related versus non-business-related terrorism.” Journal of Peace Research, 49, 407-422.
Radic, M. N. (2018), “Terrorism as a determinant of attracting FDI in tourism: Panel analysis.” Sustainability, 10, 1-17.
Rasheed, H. and M. Tahir (2012), “FDI and Terrorism: Co-integration & Granger causality.” International Affairs and Global Strategy, 4, 1-5.
Rauf, S., R. Mehmood, A. Rauf and S. Mehmood (2016), “Integrated Model to Measure the Impact of
Terrorism and Political Stability on FDI Inflows: Empirical Study of Pakistan.” International Journal of Economics and Finance, 8, 1-7.
Shah, M. H. and M. Faiz (2015), “Terrorism and foreign direct investment: An empirical analysis of SAARC countries.” MPRA. Available at https://mpra.ub.uni-muenchen.de/82008/8/MPRA_ paper_82008.pdf.
Tez Yardim Platformu (2021), “Testing the normal distribution with SPSS.” Youtube. Available at https://www.youtube.com/watch?v=4cekTDfqvWE.
Toda, H. Y. and T. Yamamoto (1995), “Statistical inference in vector autoregressions with possibly integrated processes.” Journal of Econometrics, 66, 225-250.
Turanli, M. and S. Guris (2018), Basic Statistics. Der Publications, Istanbul.
White, A. and I. Domowitz (1984), “Nonlinear regression with dependent observations.” Econometrica, 52, 143-161.
World Bank (2023a), “Foreign direct investment, net inflows (BoP, current US$) – Colombia.” Washington D.C.
World Bank (2023b), “Foreign direct investment, net inflows (BoP, current US$) – Peru.” Washington D.C.
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Mahir Terzi
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
LAER Copyright and License
Authors submitting articles to Latin American Economic Review (LAER), automatically grant this journal a license to publish. Copyright of all published material remains with the authors, who can reuse it in future work without needing to make reference to LAER. Similarly, any other contribution of material to the website (for example text, photographs, graphics, video or audio) automatically grants us a right to publish. Copyright, however, remains with the author(s).
Authors release their work under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY-NC-ND 4.0). This license allows anyone to copy, distribute and transmit the work, provided the use has no derivatives, is non-commercial and appropriate credit to the author(s) is given. (If you remix, transform, or build upon the material, you may not distribute the modified material.)
A human-readable summary of the licence:
https://creativecommons.org/licenses/by-nc-nd/4.0/
Full legal text: