The impact of transnational terrorism on US foreign direct investment

This article investigates the extent to which transnational terrorist attacks altered U.S. foreign direct investment (FDI). Time-series intervention analysis shows that 9/11 generally had little lasting influence on U.S. FDI flows. Only a few countries that experienced subsequent terrorist attacks displayed a post-9/11 drop in U.S. FDI flows, which, except for Turkey, was not long-lived. For a panel of countries, this study also examines the effect that terrorist attacks against U.S. interests had on the stock of U.S. FDI. Based on a methodology previously applied to the study of U.S. assets abroad, we find that such attacks had a significant, but small, impact on these stocks in OECD countries. Greece and Turkey displayed the largest declines-5.7 percent and 6.5 percent of their average U.S. FDI stocks, respectively There was no such effect for non-OECD countries. Terrorist efforts to limit U.S. FDI have been cost-effective.