The impact of terrorism on the FDI of the EU and EEA Countries

Abstract

The key goal of this research is to empirically determine the effects of terrorism on FDI of the selected EU and EEA member countries. The methodology is based on a system-GMM estimator for dynamic panel data models on a sample covering up to 29 countries, and 13-year periods from 2000 to 2013. The main results confirm that terrorism incidents, economic and institutional variables are found to depress FDI of analysed EU and EEA countries. It can be concluded that terrorism and institutional stability are most influential on FDI inflows of the observed EU and EEA countries. The results indicate that terrorist activities reduce security and confidence of investors in countries exposed to terrorist activities, reducing the inflow of foreign direct investment. The recommendations and proposals are given based on the results of empirical analysis.