The consequences of conflict and post-conflict periods on foreign direct investment

The main objectives of this research is to identify how foreign direct investment (FDI) reacts to minor conflicts and wars, to examine the relationship between post-conflict periods and FDI, and to determine to what extent different endings of conflict influence FDI inflows. Five hypotheses concerning conflict, post-conflict and different endings of conflict are formulated. Data from the UCDP/PRIO Armed Conflict Dataset, the UCDP Conflict Termination Dataset and UNCTAD FDI data are combined, resulting in a panel dataset of 45 years consisting of 139 countries. The results, after conducting regressions estimated by fixed effects, show that FDI is negatively affected by conflict, relative to periods with no conflict. Moreover, wars influence FDI inflows stronger than minor conflicts. Furthermore, FDI decreases in post-conflict countries, relative to countries in conflict. Ending a conflict with either a peace agreement or cease-fire agreement does not seem to matter for FDI inflows, relative to other endings of conflict. A conflict ending with government victory seems to decrease FDI.