Which foreign direct investments are most affected by political instability? Analysis of quarterly greenfield investment flows into countries in the Middle East and North Africa from 2003 to 2012 shows that adverse political shocks are associated with significantly reduced investment inflows in the non-resource tradable sectors. By contrast, investments in natural resource sectors and non-tradable activities appear insensitive to such shocks. Consistent with these patterns, the significant reduction in investment inflows in Arab Spring affected economies was starkest in the non-resource manufacturing sector. Political instability is thus associated with increased reliance on non-tradables and aggravated resource dependence. Conversely, how intensified political instability affects aggregate foreign direct investment is critically contingent on the initial sector composition of these flows.
Details
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Author
Burger, Martijn Ianchovichina, Elena Rijkers, Bob
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Document Date
2013/12/01
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Document Type
Policy Research Working Paper
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Report Number
WPS6716
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2013/12/01
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Disclosure Status
Disclosed
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Doc Name
Risky business : political instability and greenfield foreign direct investment in the Arab world
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Keywords
Trade & International Integration;political instability;Canadian Journal of Economics;real effective exchange rate;foreign direct investment;
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Citation
Burger, Martijn Ianchovichina, Elena Rijkers, Bob
Risky business : political instability and greenfield foreign direct investment in the Arab world (English). Policy Research working paper ; no. WPS 6716 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/450971468110956873/Risky-business-political-instability-and-greenfield-foreign-direct-investment-in-the-Arab-world