Does Terrorism Hinders Foreign Investments in Turkey? An Empirical Study with ARDL Bounds Test

Abstract

Terrorism has been maintained for the last five decades in fluctuating frequency in Turkey. In this process, thousands of people have been killed or wounded in over 4.000 terrorist attacks. However, the intangible economic costs and damages of them were ignored partially. Accordingly, this study investigates the intangible economic aspects of the terrorist attacks in terms of foreign direct investments over the 1988- 2018 period towards Turkey as a developing country. The findings of the Autoregressive Distributed Lag (ARDL) Bounds Test, which is designed by the results of Zivot-Andres Unit Root Test allowing a break in time series, indicate that there is not a statistically significant relationship between terrorist attacks and foreign direct investments both in the short-run and long-run at the national level. The low share of terrorist attacks targeting business and investments as well as the low frequency, severity and geographically concentration degree of them could be potential reasons for these findings. However, potentially destructive impacts of terrorist attacks, which are frequently observed in the southeast of Turkey, should not be ignorable.