Omer regev
11/10/2015
Terrorist attacks have long-lasting negative effects on economic growth. They strain public finances and lead to an increase in sovereign borrowing costs. In this Special Comment we quantify the impact of terrorism on economic growth, government expenditure, investment and the cost of borrowing. Using data from the Global Terrorism Database (GTD) covering 156 countries for 1994-2013 for our analysis, we find the following:
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The type and frequency of terrorist attacks seen in the 10 most terrorist-inflicted countries in 2013 immediately weaken GDP growth between 0.51 and 0.80 percentage points (pps);growth further deteriorates between 0.37pps and 0.59pps after one year, and 0.05pps and 0.07pps after three years.
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Such terrorist events also reduce investment growth (and therefore impair potential growth), by between 1.3pps and 2.1pps in the year of the terrorist attacks.
- These events increase governments’ cost of borrowing which jumps between 41 basis points (bps) and 65bps within one year and a further 51bps-81bps one year after the events. Terrorist incidents are defined as “the threatened or actual use of illegal force and violence by a non-state actor to attain a political, economic, religious, or social goal through fear, coercion, or intimidation.” That is, the incident has to be intentional, it must entail some level of violence or threat of violence, and the perpetrators must be sub-national actors.
Given the diversity of terrorist events, to measure the impact of terrorism on the economy we construct a terrorism index as a weighted average of the number of terrorist incidents;the number of fatalities caused by terrorism; the number of injuries from terrorist attacks;and a measure of the total property damage from terrorism.
“National Consortium for the Study of Terrorism and Responses to Terrorism (START)” (2014). Global Terrorism Database (GTD) December 2013.
Executive Summary
The number of terrorist incidents has increased rapidly, more than doubling to 11,823 by the end of 2013 from 5,000 incidents in 2011. In per capita terms, the number of incidents tripled to 2.4 incidents per million people in 2013 from 0.7 incidents per million people in 2011. Terrorism negatively affects economic growth by directly destroying production inputs, along with physical and human capital. This Special Comment quantifies the impact of terrorism on economic growth, investment, government expenditure and the government cost of borrowing.
Terrorist attacks are diverse in terms of the personal and property damage inflicted. They are also unevenly distributed across countries. More than 60% of all incidents in 2013 were concentrated in just four countries: Iraq (with 24% of all terrorist incidents), Pakistan (19%), Afghanistan (12%) and India (5.8%). To properly measure the impact of terrorism on the economy, we construct an index of terrorism as a weighted average of the total number of terrorist incidents, the number of fatalities, the number of injuries and the property damage inflicted by the terrorist event.
The index also accounts for the size of the country and the concentration of terrorism in a few countries: an additional terrorist attack in a country with high incidence of terrorism would likely have a lower impact than if that same attack were on a country with zero terrorist events.
The index also accounts for the size of the country and the concentration of terrorism in a few countries: an additional terrorist attack in a country with high incidence of terrorism would likely have a lower impact than if that same attack were on a country with zero terrorist events.
Our sample covers 156 countries for the period between 1994 and 2013.The type and frequency of terrorist events in just 2013, in the top 10 countries ranked by the value of our index of terrorism, weaken GDP growth immediately by 0.51 to 0.80pps. GDP growth further deteriorates between 0.37pps and 0.59pps after one year of the attack, and by 0.05pps and 0.07pps after three years.This means that in the absence of terrorist events, a country’s GDP could be 1.1% to 1.7% higher. These single-year events also affect investment and the government cost of borrowing. Investment growth shrinks between 1.3pps and 2.1pps in the year of the attack and leaves the level of investment between 1.8% and 2.8% lower. The cost of borrowing jumps between 41bps and 65bps within one year and a further 51bps to 81bp one year after the attack.
In reality acts of terrorism in a country are not rare or isolated so that their individual impact can be measured. In countries with high incidence of terrorism, there are generally multiple attacks year after year.It is therefore useful to consider the absence of terrorist events against the totality of terrorist events in country when measuring the impact of terrorism (as opposed to a terrorist event). A simple exercise that compares how GDP would have performed had there not been a single terrorist event between 2008 and 2013 to what actually occurred reveals that, for example, GDP in Iraq could have been by the end of 2013
8.2% higher, and in Pakistan, 5.1% higher.
8.2% higher, and in Pakistan, 5.1% higher.
Similarly, absent terrorist events, the level of investment in Pakistan could have been 9.3% higher, and in Iraq, 15.1% higher between 2008 and 2013. During that timeframe, the cost of borrowing could have been 100bps lower in Pakistan and 150bps lower in Iraq, on average had no terrorist activity taken place in these two countries...
הנתונים, המידע, הדעות והתחזיות המתפרסמות באתר זה מסופקים כשרות לגולשים. אין לראות בהם המלצה או תחליף לשיקול דעתו העצמאי של הקורא, או הצעה או שיווק השקעות או ייעוץ השקעות ב: קרנות נאמנות, תעודות סל, קופות גמל, קרנות פנסיה, קרנות השתלמות או כל נייר ערך אחר או נדל"ן– בין באופן כללי ובין בהתחשב בנתונים ובצרכים המיוחדים של כל קורא – לרכישה ו/או ביצוע השקעות ו/או פעולות או עסקאות כלשהן. במידע עלולות ליפול טעויות ועשויים לחול בו שינויי שוק ושינויים אחרים. כמו כן עלולות להתגלות סטיות בין התחזיות המובאות בסקירה זו לתוצאות בפועל. לכותב עשוי להיות עניין אישי במאמר זה, לרבות החזקה ו/או ביצוע עסקה עבור עצמו ו/או עבור אחרים בניירות ערך ו/או במוצרים פיננסיים אחרים הנזכרים במסמך זה. הכותב עשוי להימצא בניגוד עניינים. פאנדר אינה מתחייבת להודיע לקוראים בדרך כלשהי על שינויים כאמור, מראש או בדיעבד. פאנדר לא תהיה אחראית בכל צורה שהיא לנזק או הפסד שיגרמו משימוש במאמר/ראיון זה, אם יגרמו, ואינה מתחייבת כי שימוש במידע זה עשוי ליצור רווחים בידי המשתמש.
