ERF 27th Annual Conference
How Does Political Risk Matter for Foreign Direct Investment into Arab Economies?
No.
ERF27_23
Publisher
ERF
Date
May, 2021
Topic
P4. Other Economic Systems
C2. Single Equation Models
F2. International Factor Movements and International Business
The present paper extends previous work by Burger et al. (2016) that has attempted to investigate empirically the impact of political instability on FDI flows into the Arab host region. Specifically, based on gravity model approach and annual panel dataset on bilateral FDI projects in Arab countries from 2003 to 2018 (12240 projects), it explores the following research questions: how does a host country’s political instability and institutional fragility affect the bilateral inward FDI project? Is there any sectoral specificity to this impact if it exists? Which component of political risk poses the most threat for the foreign investor in a specific sector? The empirical investigation highlights the negative, significant and robust impact of perceived political risk in the Arab host-country. It also establishes that there is substantial heterogeneity in foreign investment reactions to political risk reflecting both differences in the component of political risk and sectoral characteristics.
Research Fellows
Riadh Ben Jelili
Associate Professor, Department of Economics, University of...