Does terrorism affect the inflow of Foreign Direct Investments in developed countries in Europe? A study of France, Spain and the United Kingdom

Abstract: In this study it is examined whether the amount of Foreign Direct Investments (FDI) is affected by terrorism in three developed countries in Europe from a time series approach. The countries that are examined are France, Spain and the United Kingdom. The time period is 1975-2016 and the observations are annual. In previous literature there is evidence that terrorism should have an impact on FDI. FDI and terror are assumed to have a negative relation. The model that is used for this thesis is a VAR. Each model is specified into three different model specifications where the total-, national- and transnational amount of terrorist attacks is investigated. The VAR showed no significant result for terrorism affecting FDI.