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Military expenditure, terrorism and capital flight: Insights from Africa

Simplice Asongu () and Joseph Amankwah-Amoah ()
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Joseph Amankwah-Amoah: Bristol, UK

No 16/018, Working Papers of the African Governance and Development Institute. from African Governance and Development Institute.

Abstract: In spite of the growing consensus of the need to utilise military expenditure to help combat terrorism, our understanding of the threshold at which military expenditure reduces the effect of terrorism stemming from capital flight remains largely underexplored. We employed a panel data of 37 African countries from 1996-2010 and determined that the thresholds are apparent exclusively in Quantile Regressions with military expenditure thresholds ranging from: 4.224 to 5.612 for domestic terrorism, 5.734 to 7.363 for unclear terrorism and 4.710 to 6.617 for total terrorism. No thresholds are apparent in transnational terrorism related regressions. Depending on the terrorist target, the findings broadly show that a critical mass of between 4.224 and 7.363 of military expenditure as a percentage of GDP is needed to reverse the effects of terrorism stemming from capital flight. Implications for public policy are discussed.

Keywords: Capital flight; military expenditure; terrorism; Africa (search for similar items in EconPapers)
JEL-codes: C50 D74 F23 N40 O55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-ger
Date: 2016-06
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http://www.afridev.org/RePEc/agd/agd-wpaper/Milita ... ghts-from-Africa.pdf Revised version, 2016 (application/pdf)

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