Investment,Terrorism And Military Expenditure:An Analysis Of Developing Countries Under Same Group Of Religion

Terrorism and its repercussions are the burning issues in the world during last two decades.Terrorism is the use of violence or threat by a group,individual or subnational group in order to obtain the social,political or religious objectives through fear or threat.Majority of the terrorist attacks were experienced by Muslim countries which were on the track of development are devastated by this globe calamity.However,Pakistan,Afghanistan,Iraq,Nigeria and Syria account 78%of terrorist attacks around the globe.Furthermore Muslim communities suffered 82%of terrorism related causalities from 2006 to 2013.The objective of our study is to empirically investigate the relationship between terrorism and investment under same group of religion named as Muslim and Christian from 1990 to 2013.We divide the developing countries,keeping in view the religious condition of a country like Muslim and Christian Majority countries.We also empirically examine the association between investment terrorism before and after the incidence of 9/11 among Muslim developing countries.We incorporate military expenditure as an effort against terrorism and check its relationship with investment.As already discussed major victims of terrorism are a Muslim developing country;that's why study also makes comparison for the effect of terrorism on investment among Muslim and Christian developing countries.The study also make comparison that how investment evolve due to incidence of terrorism before and after the event of 9/11.Our empirical analysis comprises of five different specifications.Initially,we empirically investigate the traditional investment nexuses growth model.In this specification,we include only economic variables such as economic growth,military expenditure,trade openness,education,exchange rate and inflation.However,second and third specification include internal and external conflict with all economic variables;separately.In addition,fourth specification comprises of terrorism with all economic variables,while last specification includes all the variables.The different specification of model tells us that how terrorism relates with investment in the presence and absence of different conflicts.Initially,we check the sign of variables by applying Ordinary Least Square(OLS)and apply different diagnostic test for several econometric problems such as Multicollinearity,Autocorrelation and Heterockedasticity.Diagnostic test confirms the presence of heterockedasticity,which shifts or analysis towards Feasible Generalized Least Square(FGLS).There are two major issues related to endogeneity.First,terrorism lowers the level of output which further reduces the level of investment.This issue can be mitigated by counterterrorism efforts of the government.Second,in national income account identity economic growth affects the investment endogenously.This raises the problem of endogeneity.The conventional solution of endogeneity is to introduce the approach of instrumental variable.The System generalized method of moments(SGMM)estimation is useful in above mentioned situation.Initially,we empirically investigate the relationship between domestic terrorism and investment among Muslim developing countries.Our findings reveal that all economic variables exhibit positive and significant relationship with investment in different specification of models among Muslim and Christian developing countries.However,domestic terrorism shows negative and significant relationship with investment in the presence and absence of conflicts among Muslim and Christian developing countries.The comparison of slope coefficient by using dummy variable reveals that the percentage decrease in investment due to incidence of domestic terrorism is greater among Muslim developing countries in comparison with Christian developing countries.In second part,we introduce total terrorism(domestic and transnational)and check its relationship with investment among Muslim and Christian developing countries.All economic variables exhibit positive and significant relationship with investment,while total terrorism confirms the presence of negative and significant relationship with investment among Muslim and Christian developing countries.Furthermore,the percentage decrease in investment due total terrorist attacks is greater among Muslim developing countries as compare to Christian developing countries.However,total terrorism also contributes more as compare to domestic terrorism for the declining in investment among Muslim and Christian developing countries.In third part of empirical investigation,we check the relationship between total terrorism and investment among Muslim developing countries before and after the incidence 9/11 because terrorist attacks increase rapidly among Muslim developing countries after the incidence of 9/11.We divide the data in two parts from 1990-2000 and from 2001 to 2013 and empirically investigate the relationship between total terrorism and investment separately.Our results suggests that increase in economic variables leads to increase in investment,while increase total terrorism reduces the level of investment in the presence and absence of conflicts among Muslim developing countries before and after the incidence of 9/11.The percentage decrease in investment after the incidence of 9/11 due to total terrorist attacks is greater as compare to pre 9/11 analysis among Muslim developing countriesIn addition,military expenditure shows positive and significant relationship with investment among Muslim and Christian developing countries.It also implies that increase in military expenditure will lead to increase in investment before and after the incidence of 9/11 among Muslim developing countries.Security is the most important factor for public foreign investor for execution of investment in that particular country.Policy makers should pay more attention for the reduction of terrorism among Muslim developing countries in order to increase the level of investment among all developing countries.The results indicates the public policy efforts to mitigate the loss of private investment which can be done initially by public investments to ensure public safety.