How military expenses effect FDI inflows to developing countries in the presence of armed conflict

What is it about?

Economic theory suggest that high levels of military expenses reduces FDI inflows to a country. However, in the presence of armed conflict in a country whether the negative relationship between military expenses and FDI inflows holds is debate able. We provide evidence that a country experiencing armed conflict can actually benefits from increased military expenses by attracting higher FDI inflows.

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Photo by Precondo CA on Unsplash

Photo by Precondo CA on Unsplash

Why is it important?

Our work show that in the long run, higher military expenses in the developing countries that experience armed conflict can lead to higher FDI inflows compared to countries that face no conflict. This result has an important policy implication for the policy makers in conflict ridden low income countries as it provides policy maker a tool through which they can attract foreign investment in the country.

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