Effect of Terrorism on Foreign Direct Investment in Burkina Faso

Résumé

This article examines the effects of terrorism on foreign direct investment (FDI) flows to Burkina Faso. The study uses data for the period 2015 - 2018, collected from the Global Terrorism Database and the World Bank. Using ordinary least squares (OLS) technique for data analysis, two models have been tested. Model 1 tests the immediate effect of terrorism on FDI flows. As for model 2, it takes into account the lag and is based on the principle that the effect of terrorist attacks is not immediate on FDI flow. The results of the two models show that terrorism does not explain the changes in FDI inflows to Burkina Faso over the period 2015 - 2018. But the study has important limitations: the sample size is very small for a matter of data availability. In addition, the models used do not take into account the media echo of terrorist attacks. This can be explained by a difficulty in quantifying this variable. However, despite these limitations and the results obtained through ordinary least squares (OLS) technique, it has been recognized that terrorist activity is a real obstacle to the country's economic growth. On the basis of this conclusion, recommendations and avenues for future research were highlighted.

JEL Classification: F21, F23, H56, O55

Paper type: Empirical research