PERTANIKA JOURNAL OF SOCIAL SCIENCES AND HUMANITIES

This paper examines the long-and short-term impacts of country risk on FDI using co-integration and error correction models in GCC countries for the period from 2002 to 2015. We use three proxies for country risk: corruption, regulatory quality and political stability and absence of violence. The evidence suggests a positive long-term impact of fighting corruption and improving political stability and absence of violence on the attractiveness of host countries to FDI. Surprisingly, quality of regulations variable negatively affects FDI. The results of our study suggest that policy makers could attract more FDI to GCC countries through directing efforts toward combatting corruption and enhancing political stability which may help GCC economies attract more FDI.