Financial Uncertainty in Germany and its Impact on Western European Terrorism

Mario Jovanovic

No 296, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: This paper analyses the link between the VDAX as a proxy for European financial uncertainty and the number of terror incidents in Western Europe. Considering data of the Global Terrorism Database, the number of terror incidents does - on average - not affect financial uncertainty. In contrast, based on a behavioral model of terrorism motivated by Schmid and de Graaf (1982), lagged financial uncertainty contains information for the risk of terror events. Estimation results of the negative binominal quasi maximum likelihood count data model confirm an inverse impact of lagged financial uncertainty on terrorism. Furthermore, empirical evidence leads to the conclusion of average lead time for terror incidents of 6 month. These results are potentially important for terror prevention.

Keywords: VDAX; terror events; forecasting; count data; VDAX; terror events; forecasting; count data (search for similar items in EconPapers)
JEL-codes: C25 G02 Z10 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:296

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