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Advisor(s)
Abstract(s)
We explore the impact of major terrorism shocks on macroeconomic and fiscal variables´ dynamics using an unbalanced panel of 191 heterogeneous countries from 1970 to 2018. By means of the local projection method, we find that a terrorist shock lowers a country’s real GDP as well as government tax revenues and raises debt-to-GDP ratio. The composition of government spending shifts in favor of military spending. Low-income countries are affected more than both emerging market and advanced economies. Our results are robust to a battery of sensitivity and robustness tests.
Description
Keywords
fiscal policy growth armed conflict terrorism panel data local projection method seemingly unrelated regressions
Pedagogical Context
Citation
Clements, Benedict ... [et al.] (2020). "Terror and its fiscal consequences". Instituto Superior de Economia e Gestão – REM Working paper nº 0140 – 2020
Publisher
ISEG - REM - Research in Economics and Mathematics