Terrorist incidents and foreign direct investment: results uncovered by relational models in the cases of Colombia and Peru

Abstract

This paper seeks to examine if there is a causal link between terrorist incidents and foreign direct investment in the cases of Colombia and Peru, using large-scale and up-to-date data. The data of both parameters from the early 1970s to 2020 are involved in the analysis. The statistical characteristics of the variables entail different relational models for the examination. While the data concerning Colombia necessitate the Toda-Yamamoto test, the data concerning Peru require robust regression analysis. The Toda-Yamamoto test indicates no causality between the variables concerning Colombia. On the other hand, robust regression analysis crystallizes for Peru that there is a causality from foreign direct investment to terrorist incidents and a causality tendency from terrorist incidents to foreign direct investment. Theoretically, the results reveal that the variables do not enable establishing a causal relationship for all countries.