Aid, Terrorism, and Foreign Direct Investment: Empirical Insight Conditioned on Corruption Control

Forthcoming, International Economic Journal

22 Pages Posted: 8 Dec 2018

See all articles by Uchenna Efobi

Uchenna Efobi

Covenant University

Simplice Asongu

African Governance and Development Institute

Ibukun Beecroft

Covenant University

Date Written: January 14, 2018

Abstract

This paper examines the effect of foreign aid in the terrorism-FDI nexus while considering the extent of domestic corruption-control (CC). The empirical evidence is based on a sample of 78 developing countries. The following findings are established: the negative effect of terrorism on FDI is apparent only in countries with higher levels of CC; foreign aid dampens the negative effect of terrorism on FDI only in countries with high levels of CC. The result is mixed when foreign aid is subdivided into its bilateral and multilateral components. Our findings are in accordance with the stance that bilateral aid is effective in reducing the adverse effect of terrorism on FDI. Multilateral aid also decreases the adverse effect of other forms of terrorism that can neither be classified as domestic nor as transnational. Policy implications are discussed.

Keywords: Conflict; Developing countries; Foreign investment; Foreign aid; Terrorism

JEL Classification: D74; F21; F35

Suggested Citation

Efobi, Uchenna and Asongu, Simplice and Beecroft, Ibukun, Aid, Terrorism, and Foreign Direct Investment: Empirical Insight Conditioned on Corruption Control (January 14, 2018). Forthcoming, International Economic Journal, Available at SSRN: https://ssrn.com/abstract=3284414

Uchenna Efobi

Covenant University ( email )

P.M.B. 1023
Km 10 Idiroko road
Ota, Ogun State 234
Nigeria

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Ibukun Beecroft

Covenant University ( email )

P.M.B. 1023
Km 10 Idiroko road
Ota, Ogun State 234
Nigeria

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