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

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). 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.