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Terrorism and Foreign Direct Investment: An empirical analysis of Afghanistan

Dr. Nassir Ul Haq Wani

Volume 1 Issue 3 | Jul 2018

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Abstract

The current state of terrorism has posed serious challenges to stability of macroeconomic environment causing the displacement of Foreign Direct Investment (FDI). This study aims to find the impact of terrorism along with other important independent variables such as market size, economic growth, infrastructure, exchange rate and trade openness on FDI inflows in Afghanistan. By employing a time series econometric estimation model on annual data from 2008-2017 the results of the study showed a significant positive impact of market size, trade openness, infrastructure availability, exchange rate and economic growth on inward FDI in Afghanistan. The results revealed that terrorism has statistically significant and negative relationship with FDI inflows. This empirically establishes the fact that terrorism is a serious threat to FDI and economic growth for Afghan economy.