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Haiti's Political Turmoil: An Examination of its Implications on Foreign Direct Investment

Year 2023, , 248 - 258, 30.12.2023
https://doi.org/10.54821/uiecd.1396044

Abstract

Haiti is a country with a history of political instability and faces considerable challenges in attracting foreign direct investment (FDI). This study investigates the impact of political turmoil on FDI in Haiti from 1994 to 2020. The study relies on secondary data obtained from sources such as International Financial Statistics (IFS), World Development Indicators(WDI), and the International Country Risk Guide (ICRG). The study utilizes the Vector Error Correction Model (VECM) and the Dynamic Ordinary Least Squares (DOLS) statistical technique. The findings indicate that, over the long run, political instability and inflation have an adverse influence on FDI in Haiti. Conversely, exchange rate, interest rate, and trade openness positively affect FDI. However, these variables do not directly drive FDI in the short term but are influenced by external factors. This paper emphasizes the critical role of establishing a stable political environment, effectively managing inflation, and maintaining competitive exchange rates and interest rates to enhance FDI attraction. Additionally, promoting trade openness is deemed crucial.

References

  • Al-Khouri, R., & Abdul Khalik, M.U. (2013). Does political risk affect the flow of foreign direct investment into the Middle East North African Region? Journal of Global Business and Technology, 9(2),47-59.
  • Baek, K., & Qian, X. (2011). An analysis on political risks and the flow of foreign direct investment in developing and industrialized economies. Economics, Management, & Financial Markets, 6(4), 60–91.
  • Bakari, H. R., Chamalwa, H. A., & Jackson S. Y. (2013). Determinants of foreign direct investment (FDI) inflows to Nigeria (1970-2010). IOSR Journal of Mathematics, 9(1), 24–35.
  • Bhatti, N. A., Ghani, E. K., & Lodhi, M. M. (2008). Foreign direct investment in Pakistan: What determines the flow? Journal of Asian Business, 24(2), 185-201.
  • Bitar, N., Hamadeh, M., & Khoueiri, R. (2019). Impact of political instability on foreign direct investment in Lebanon. Asian Social Science, 16(1), 41-48.
  • Bokhari, S. A. A., Aftab, M., & Shahid, M. (2021). Political instability and inward foreign direct investment: The perspective of government corruption from an emerging economy. Industry Promotion Research, 6(4), 69–81.
  • Bouchoucha, N., & Ben Ammou, S. (2015). Political and institutional determinants of foreign direct investment: An application for MENA region countries. International Journal of Science and Research (IJSR), 4(8), 1866–1871.
  • Bouyahiaoui, N., & Hammache, S. (2013). The impact of country risk on foreign direct investments in the MENA region. International Journal of Innovation and Applied Studies, 2(3), 300-313.
  • Brada, J. C., Kutan, A. M., & Yigit, T. M. (2003). The effects of transition and political instability on foreign direct investment: Central Europe and the Balkans (No. B 28-2003). ZEI Working Paper.
  • Burger, M. J., Ianchovichina, E., & Rijkers, B. (2013). Risky business: Political instability and Greenfield foreign direct investment in the Arab World. World Bank Policy Research Working Paper, (6716).
  • Busse, M.,& Hefeker, C. (2007). Political risk, institutions and foreign direct investment. European Journal of Political Economy, 23(2), 397–415.
  • Del Bo, C. (2009, September). Foreign direct investment, exchange rate volatility and political risk. In ETSG Conference, September, Rome.
  • Dunning, J. H. (2000). The eclectic paradigm as an envelope for economic and business theories of MNE activity. International Business Review, 9(1), 167-190.
  • Goswami, G. G., & Haider, S. (2014) Does political risk deter FDI inflows? An analytical approach using panel data and factor analysis. Journal of Economic Studies, 41(2), 233–252.
  • Hayakawa, K., Kimura, F., & Lee, H. H. (2013). How does country risk matter for foreign direct investment?. The Developing Economies, 51(1), 60-78.
  • Irshad, H. (2017). Relationship among political instability, stock market returns and stock market volatility. Studies in business and economics, 12(2), 70-99.
  • International country risk guide (ICRG)https://www.prsgroup.com/explore-our-products/icrg/ accessed on (09.05.23).
  • Krifa-Schneider, H., & Matei, I. (2010). Business climate, political risk and FDI in developing countries: Evidence from panel data. International Journal of Economics and Finance, 2(5), 54-65.
  • Khan, M. M., & Akbar, M. I. (2013). The impact of political risk on foreign direct investment. MPRA Paper, No. 47283.
  • Kurecic, P., & Kokotovic, F. (2017). The relevance of political stability on FDI: A VAR analysis and ARDL models for selected small, developed, and instability threatened economies. Economies, 5(3), 22.
  • Mádr, M., & Kouba, L. (2015). Does the political environment affect inflows of foreign direct investment? evidence from emerging markets. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 63(6), 2017-2026.
  • Morrissey, O., & Udomkerdmongkol, M. (2012). Governance, private investment and foreign direct investment in developing countries. World Development, 40(3), 437-445.
  • Rugman, A. M. (1981) Inside the multinational enterprise: International strategy and structure. Croom Helm. Sekkat, K., & Veganzones-Varoudakis, M. (2007). Openness, investment climate, and FDI in developing countries. Review of Development Economics, 11(4), 607-620.
  • Slangen, A. H. L., & Beugelsdijk, S. (2010). The impact of institutional hazards on foreign multinational activity: A contingency approach perspective. Journal of International Business Studies, 41(1),1-16.
  • Tung, L. T., & Thang, P. N. (2020). Impact of FDI on private investment in the Asian and African developing countries: A panel-data approach. The Journal of Asian Finance, Economics, and Business, 7(3), 295-302.
  • Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics, 80(2), 190-207.
  • Vadlamannati, K. C. (2012). Impact of political risk on FDI revisited an aggregate firm level analysis. International Interactions, 38(1), 111–139.
  • Yousaf, M. M., Hussain, Z., & Ahmad, N. (2008). Economic Evaluation of Foreign Direct Investment in Pakistan. Pakistan Economic and Social Review, 46, 37-56.
  • https://data.imf.org/?sk=4c514d48-b6ba-49ed-8ab9-52b0c1a0179b accessed on (09/03/23)
  • https://databank.worldbank.org/source/world-development-indicators accessed on (09/02/23)

Haiti'nin Siyasi Çalkantısı: Doğrudan Yabancı Yatırım Üzerindeki Etkilerinin İncelenmesi

Year 2023, , 248 - 258, 30.12.2023
https://doi.org/10.54821/uiecd.1396044

Abstract

Haiti, siyasi istikrarsızlık geçmişine sahip ve doğrudan yabancı yatırım (FDI) çekme konusunda önemli zorluklarla karşı karşıya olan bir ülkedir. Bu çalışma, 1994-2020 yılları arasında Haiti'deki siyasi çalkantının FDI üzerindeki etkisini incelemektedir. Çalışma, Uluslararası Finans İstatistikleri (IFS), Dünya Kalkınma Göstergeleri (WDI) ve Uluslararası Ülke Risk Rehberi (ICRG) kaynaklardan elde edilen ikincil verilere dayanmaktadır. Çalışma, Vektör Hata Düzeltme Modeli (VECM) ve Dynamic Ordinary Least Squares (DOLS) istatistiksel tekniği kullanmaktadır. Bulgular, uzun vadede siyasi istikrarsızlık ve enflasyonun Haiti'deki FDI üzerinde olumsuz bir etkisi olduğunu göstermektedir. Bununla birlikte, döviz kuru, faiz oranı ve ticaret açıklığı FDI'yi olumlu etkiler. Ancak bu değişkenler kısa vadede doğrudan yabancı yatırımları yönlendirmemekte, dış faktörlerden etkilenmektedir. Bu çalışma, doğrudan yabancı yatırım çekiciliğini artırmak için istikrarlı bir siyasi ortam oluşturmanın, enflasyonu etkili bir şekilde yönetmenin ve rekabetçi döviz ve faiz oranlarını sürdürmenin kritik rolünü vurgulamaktadır. Ayrıca, ticari açıklığın teşvik edilmesinin de önemli olduğu değerlendirilmektedir

References

  • Al-Khouri, R., & Abdul Khalik, M.U. (2013). Does political risk affect the flow of foreign direct investment into the Middle East North African Region? Journal of Global Business and Technology, 9(2),47-59.
  • Baek, K., & Qian, X. (2011). An analysis on political risks and the flow of foreign direct investment in developing and industrialized economies. Economics, Management, & Financial Markets, 6(4), 60–91.
  • Bakari, H. R., Chamalwa, H. A., & Jackson S. Y. (2013). Determinants of foreign direct investment (FDI) inflows to Nigeria (1970-2010). IOSR Journal of Mathematics, 9(1), 24–35.
  • Bhatti, N. A., Ghani, E. K., & Lodhi, M. M. (2008). Foreign direct investment in Pakistan: What determines the flow? Journal of Asian Business, 24(2), 185-201.
  • Bitar, N., Hamadeh, M., & Khoueiri, R. (2019). Impact of political instability on foreign direct investment in Lebanon. Asian Social Science, 16(1), 41-48.
  • Bokhari, S. A. A., Aftab, M., & Shahid, M. (2021). Political instability and inward foreign direct investment: The perspective of government corruption from an emerging economy. Industry Promotion Research, 6(4), 69–81.
  • Bouchoucha, N., & Ben Ammou, S. (2015). Political and institutional determinants of foreign direct investment: An application for MENA region countries. International Journal of Science and Research (IJSR), 4(8), 1866–1871.
  • Bouyahiaoui, N., & Hammache, S. (2013). The impact of country risk on foreign direct investments in the MENA region. International Journal of Innovation and Applied Studies, 2(3), 300-313.
  • Brada, J. C., Kutan, A. M., & Yigit, T. M. (2003). The effects of transition and political instability on foreign direct investment: Central Europe and the Balkans (No. B 28-2003). ZEI Working Paper.
  • Burger, M. J., Ianchovichina, E., & Rijkers, B. (2013). Risky business: Political instability and Greenfield foreign direct investment in the Arab World. World Bank Policy Research Working Paper, (6716).
  • Busse, M.,& Hefeker, C. (2007). Political risk, institutions and foreign direct investment. European Journal of Political Economy, 23(2), 397–415.
  • Del Bo, C. (2009, September). Foreign direct investment, exchange rate volatility and political risk. In ETSG Conference, September, Rome.
  • Dunning, J. H. (2000). The eclectic paradigm as an envelope for economic and business theories of MNE activity. International Business Review, 9(1), 167-190.
  • Goswami, G. G., & Haider, S. (2014) Does political risk deter FDI inflows? An analytical approach using panel data and factor analysis. Journal of Economic Studies, 41(2), 233–252.
  • Hayakawa, K., Kimura, F., & Lee, H. H. (2013). How does country risk matter for foreign direct investment?. The Developing Economies, 51(1), 60-78.
  • Irshad, H. (2017). Relationship among political instability, stock market returns and stock market volatility. Studies in business and economics, 12(2), 70-99.
  • International country risk guide (ICRG)https://www.prsgroup.com/explore-our-products/icrg/ accessed on (09.05.23).
  • Krifa-Schneider, H., & Matei, I. (2010). Business climate, political risk and FDI in developing countries: Evidence from panel data. International Journal of Economics and Finance, 2(5), 54-65.
  • Khan, M. M., & Akbar, M. I. (2013). The impact of political risk on foreign direct investment. MPRA Paper, No. 47283.
  • Kurecic, P., & Kokotovic, F. (2017). The relevance of political stability on FDI: A VAR analysis and ARDL models for selected small, developed, and instability threatened economies. Economies, 5(3), 22.
  • Mádr, M., & Kouba, L. (2015). Does the political environment affect inflows of foreign direct investment? evidence from emerging markets. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 63(6), 2017-2026.
  • Morrissey, O., & Udomkerdmongkol, M. (2012). Governance, private investment and foreign direct investment in developing countries. World Development, 40(3), 437-445.
  • Rugman, A. M. (1981) Inside the multinational enterprise: International strategy and structure. Croom Helm. Sekkat, K., & Veganzones-Varoudakis, M. (2007). Openness, investment climate, and FDI in developing countries. Review of Development Economics, 11(4), 607-620.
  • Slangen, A. H. L., & Beugelsdijk, S. (2010). The impact of institutional hazards on foreign multinational activity: A contingency approach perspective. Journal of International Business Studies, 41(1),1-16.
  • Tung, L. T., & Thang, P. N. (2020). Impact of FDI on private investment in the Asian and African developing countries: A panel-data approach. The Journal of Asian Finance, Economics, and Business, 7(3), 295-302.
  • Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics, 80(2), 190-207.
  • Vadlamannati, K. C. (2012). Impact of political risk on FDI revisited an aggregate firm level analysis. International Interactions, 38(1), 111–139.
  • Yousaf, M. M., Hussain, Z., & Ahmad, N. (2008). Economic Evaluation of Foreign Direct Investment in Pakistan. Pakistan Economic and Social Review, 46, 37-56.
  • https://data.imf.org/?sk=4c514d48-b6ba-49ed-8ab9-52b0c1a0179b accessed on (09/03/23)
  • https://databank.worldbank.org/source/world-development-indicators accessed on (09/02/23)
There are 30 citations in total.

Details

Primary Language English
Subjects Economic Models and Forecasting, Macroeconomics (Other)
Journal Section Research Articles
Authors

Pierre Richard Louıs-jacques

Sheikh Abdul Kader This is me 0000-0003-3959-7169

Publication Date December 30, 2023
Submission Date November 26, 2023
Acceptance Date December 23, 2023
Published in Issue Year 2023

Cite

APA Louıs-jacques, P. R., & Abdul Kader, S. (2023). Haiti’s Political Turmoil: An Examination of its Implications on Foreign Direct Investment. International Journal of Business and Economic Studies, 5(4), 248-258. https://doi.org/10.54821/uiecd.1396044

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