Does globalization mitigate the adverse effects of terrorism on growth?

Javed Younas

Oxford Economic Papers, 2015, vol. 67, issue 1, 133-156

Abstract: This study identifies the damaging influence wielded by terrorism on the economy. It investigates whether international openness limits the negative consequences of terrorism on economic growth. The analysis is focused on 120 developing countries over the period 1976–2008. The positive interaction effect of terrorism and globalization suggests that the latter ameliorates the adverse impact of the former on growth. I also identify the critical values of the globalization index where the negative effects of both domestic and transnational terrorism are offset by the positive impact of openness; this, however, happens at a significantly high level of openness. The findings are robust to using the disaggregated measure of globalization and some individual indicators of economic openness. The result helps explain why the growth consequences of terrorism vary across nations and hold important policy implications.

Date: 2015
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