Impact of Political Instability on Foreign Direct Investment in Lebanon

Foreign direct investment (FDI) is an important determinant of economic growth. A wealth of literature has tackled its determinants; however few investigated the effect of political risk on FDI. Consequently, this study examines 12 ICRG political risk indicators, after removing multicollinearity and grouping them into three categories, to test the nature of this relation in the case of Lebanon over the period 2008-2018. The findings provide evidence of significant causality between all political risk factors and FDI inflows. Other determinants like “Infrastructure”, “Inflation”, “Trade Openness” and “Wage Rates” have insignificant effects.