Impact of Political Instability on Foreign Direct Investment in Lebanon

Bitar, Nicholas; Hamadeh, Mohamad; Khoueiri, Roy

doi:10.5539/ass.v16n1p41

Cited by 15 publications

(11 citation statements)

References 10 publications

(11 reference statements)

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“…On the one hand, the simultaneous inclusion of all indicators leads to biased estimates as a result of multicollinearity; on the other hand, the inclusion of indicators in turn will increase the number of regressions in the study and can lead to difficulties when interpreting results. Therefore, in current research, the method of principal component analysis was implemented in order to structure the political stability indicators and obtain a sufficient amount of institutional indicators [53,54].…”

Section: Econometric Methodologymentioning

confidence: 99%

Determinants of Foreign Direct Investment in Developed and Developing Countries: Impact of Political Stability

Vasilyeva¹,

Mariev²

2021

EoR

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Stable political environment and prominent development of political institutions increase foreign direct investment flows by providing lower risks for investors. However, this impact can vary according to the development of the country. This study aims to investigate the impact of various indicators of political stability on foreign direct investment attraction for different economies distinguished by their development level. Our database includes 66 FDI-recipient countries and 98 FDI-investing countries for the period from 2001 to 2018. By applying the gravity approach and Poisson Pseudo Maximum Likelihood method with instrumental variables (IV PPML), we model bilateral FDI flows, incorporating variables reflecting various aspects of political stability formed by the principal components analysis. Interestingly, we found mixed results regarding the impact of political stability on FDI flows. In particular, political stability indicators were found to be insignificant, when analysing the bilateral FDI flows for the group of developed economies. We obtained similar result for the group of developing economies. However, political stability variables significantly influence FDI flows for countries with different development level, confirming the hypothesis that countries’ development affects bilateral FDI flows. Besides, we discover the significant difference between developed and developing countries referring to FDI-investors. Based on the obtained results, we highlight a few policy implications for developing and developed economies.

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Section: Econometric Methodologymentioning

confidence: 99%

Determinants of Foreign Direct Investment in Developed and Developing Countries: Impact of Political Stability

Vasilyeva¹,

Mariev²

2021

EoR

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“…Studi selanjutnya juga mempertimbangkan implikasi risiko politik dan stabilitas politik pada arus masuk FDI. Misalnya, Bitar et al (2019) melakukan penelitian tentang dampak faktor-faktor tersebut untuk menarik FDI dalam perekonomian Lebanon. Para penulis kemudian menyimpulkan bahwa risiko politik secara signifikan mempengaruhi investasi asing langsung Negara berkembang yang mencari peningkatan investasi asing langsung dari negara maju, maka sangat penting bagi mereka untuk perlu meningkatkan lingkungan politik dan memberikan kondisi yang menguntungkan bagi negara investor (Groznykh et al, 2020).…”

Section: Hubungan Stabilitas Politik Dengan Fdiunclassified

Analisis Tax Holiday Dan Fundamental Perekonomian Negara Terhadap Foreign Direct Investment (Fdi) Di Asean-9

Sunaryo

Nurhayati

2023

media ekon.

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In the current era of liberalization, openness to foreign capital is an important factor affecting the economic performance of a country. Foreign Direct Investment (FDI) is an important source of capital for developing countries including ASEAN member countries. This study aims to determine the effect of taxation factors, namely tax holidays and corporate income tax rates, as well as non-tax factors, namely political stability and security, regulatory quality, domestic market size, macroeconomic stability, and labor availability on FDI flows in ASEAN. This study uses panel data regression. Research data is secondary data in the form of 2010-2019 period from 9 ASEAN member countries. The results of this study indicate that taxation factors, namely tax holidays and corporate income tax rates, have no effect on FDI flows. Meanwhile, for non-taxation factors, the quality of regulations and regulations, the size of the domestic market, and macroeconomic stability have an influence on FDI flows. Other non-tax factors, namely political stability and labor availability, have no influence on FDI flows in these countries.

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“…Later studies also considered the implications of political risks and political stability on FDI inflows. For example, Bitar et al (2019) conducted a research on the impact of such factors for attracting FDI in the Lebanese economy. The authors then confirmed that political risk significantly affected foreign direct investment.…”

Section: Literature Reviewmentioning

confidence: 99%

“…It must be considered that all the indices employed in the research are strongly correlated. In order to deal with the multicollinearity problem, all these indicators were integrated into four groups (Bitar, 2019), which are depicted in table 2. Source: Authors Bearing the data and research results of previous studies in mind, the central hypothesis states that political risk indices have positive and significant impact on foreign direct investment, such that with an increase in the value of an index, the amount of foreign direct investment would increase.…”

Section: Datamentioning

confidence: 99%

The Role of Political Stability in Foreign Direct Investment Attraction: Cross-Country Analysis

Vasilyeva

Mariev

Plotnikov

et al. 2020

PEB

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This study is devoted to the evaluation and scrutiny of political stability as a determinant of foreign direct investment (FDI) inflows to different countries. The primary objective of the research is to estimate the impact and influence of various indicators of political stability on foreign direct investment inflows. The analysis is delivered based on a database on cross-country FDI inflows of 66 FDI-importer countries and 98 FDI-exporter countries, in the period between 2001-2018. This article uses the assumption that the impact of political stability might be different for both the groups of developed and developing countries. As the developed economies have higher political stability, they tend to attract larger amounts of foreign direct investment compared to developing economies, where the political situation can be less stable. Furthermore, the estimation applies the gravity approach, while the main method used for the econometric calculations is the Pseudo Poisson Maximum Likelihood (PPML) regression. The outcome revealed that in most cases the indicators of political stability had a positive impact on the foreign direct investment inflows. However, the results are not constant for all groups of countries. Therefore, if a developed country is an importer of investment, then most of the indicators of political stability become significant and have a positive influence on the foreign direct investment. At the same time, if the importer is a developing country, then for the investor-developed economy, political stability becomes a significant factor. Similarly, if the FDI-exporter is a developing economy, then determinants of political stability are insignificant. Based on these results, possible recommendations for refined government policies can be suggested.

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Impact of Political Instability on Foreign Direct Investment in Lebanon

Cited by 15 publications

References 10 publications

Determinants of Foreign Direct Investment in Developed and Developing Countries: Impact of Political Stability

Determinants of Foreign Direct Investment in Developed and Developing Countries: Impact of Political Stability

Analisis Tax Holiday Dan Fundamental Perekonomian Negara Terhadap Foreign Direct Investment (Fdi) Di Asean-9

The Role of Political Stability in Foreign Direct Investment Attraction: Cross-Country Analysis

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