Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/114569
Authors: 
Asongu, Simplice
Efobi, Uchenna
Beecroft, Ibukun
Year of Publication: 
May-2015
Series/Report no.: 
AGDI Working Paper WP/15/019
Abstract: 
We investigate how foreign aid dampens the effects of terrorism on FDI using interactive quantile regressions. The empirical evidence is based on 78 developing countries for the period 1984-2008. Bilateral and multilateral aid variables are used, while terrorism dynamics entail: domestic, unclear, transnational and total number of terrorist attacks. The following findings are established. First, while the effects of multilateral aid are consistently significant with positive threshold evidence, bilateral aid is only positively significant in bottom quantiles. Second, with the slight exception of transnational terrorism in bilateral aid regressions, the impacts of terrorism dynamics are unexpectedly positive, in: (i) bottoms quantiles with domestic terrorism and the 0.25th quantile with total terrorism, for bilateral aid regressions, and (ii) the 0.25th quantile with domestic terrorism and bottom quantiles of transnational terrorism, for multilateral aid regressions. Third, interactions between terrorism and foreign aid dynamics unexpectedly yield negative effects in: (i) bilateral aid and domestic terrorism in bottom quantiles and (ii) multilateral aid and domestic (transnational) terrorism in the 0.25th(bottom) quantile(s). The modifying threshold value of bilateral aid is higher than that of multilateral aid. Fourth, there is positive threshold evidence from GDP growth, infrastructural development and trade openness. Policy implications are discussed.
Subjects: 
FDI
Foreign aid
Terrorism
Quantile regression
JEL: 
C52
D74
F23
F35
O40
Additional Information: 
This is a working paper. Authors welcome suggestions and comments.
Document Type: 
Working Paper

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