Document Type : Research Paper
Authors
1 Assistants Professor, Department of Economic, Payame Noor University, Tehran, Iran.
2 Ph.D. in Public Sector Economics, Department of Economic, Lorestan University, Khoram Abad, Iran.
Abstract
Security is a necessary condition for attracting foreign direct investment (fdi) in a country; However, the high level of conflict and political instability are prominent features of most countries in the MENA region. Therefore, many countries in this region try to improve their security by increasing military spending. Now, the question raised in this research is, what is the effect of military spending on fdi in MENA countries, and have conflict-prone countries in this region been able to help improve the level of security and ultimately attract fdi through increasing military spending? For this purpose, the statistical information of 12 countries of MENA region during the years 2000-2021 has been used in the form of panel data analysis and fixed effects estimator (FE). Empirical results show that in the absence of armed conflict (as an inverse indicator of security), the effect of military burden (the share of military spending in GDP) on the net fdi inflows is negative and significant; But the interactive effect of military burden and armed conflict on the net fdi inflows is positive, that shows in conflict-prone countries, increasing the share of military spending in GDP can help attract fdi through the reduction of armed conflict. The robustness of the results obtained by separating the countries of the MENA region into two categories of countries facing armed conflict and countries without armed conflict has also been confirmed. Based on this, the results show that the negative effect of the military burden on the net fdi inflows in countries facing armed conflict is much lower than in countries without armed conflict. Based on other results, economic growth, gross capital formation and the degree of trade openness have a positive and significant effect and armed conflict has a negative and significant effect on the net fdi inflow in the studied countries.
Keywords
Main Subjects
)