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Terrorism and international economic policy |
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| Institution: | 1. WZB Berlin Social Science Center, Reichpietschufer 50, 10785, Berlin, Germany;2. Johannes Kepler University Linz, Altenbergerstraße 69, A-4040, Linz-Auhof, Austria;1. Department of Economics, U.S. Naval Academy, USA;2. FAME|GRAPE, ul. Mazowiecka 11/14, 00-052, Warsaw, Poland;1. University of Louisiana at Lafayette, USA;2. University of Arkansas at Little Rock, USA;1. Research Department, Budget Office, Ministry of Finance, Teatinos 120, Santiago, Chile;2. Facultad de Economía y Negocios, Universidad Andrés Bello, Santiago, Chile;1. Indian Institute of Foreign Trade, Kolkata, India;2. Centre for Training and Research in Public Finance and Policy (CSSSC), Calcutta, India;3. CES–ifo, Munich, Germany;4. GEP, Nottingham, UK;5. National Law University, Delhi, India;6. Indian Statistical Institute, Kolkata, India |
| Abstract: | We add to the ongoing discussion regarding the policy consequences of terrorism by analyzing the effect of terrorism on international economic policy for a panel of 170 countries between 1970 and 2016. We find that countries resort to less liberal international economic policies when facing the threat of terrorism. This effect is especially relevant to smaller (less populated) countries. Our main finding is robust to an instrumental-variable approach. We argue that governments pursue less liberal international economic policies in response to terrorism to interrupt the organization and financing of terrorism, limit capital flight, stabilize public finances and signal political resolve. |
| Keywords: | Terrorism International economic policy De jure economic openness Globalization D74 F13 F30 |
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