Time-varying economic consequences of terrorism in the USA: Evidence from tvp-svar model

Date
2022
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Source Title
Economic Computation and Economic Cybernetics Studies and Research
Print ISSN
0424267X
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Publisher
Bucharest University of Economic Studies
Volume
56
Issue
2
Pages
133 - 148
Language
English
Type
Article
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Abstract

This study aims to examine the economic consequences of terrorism (the effects on economic growth and its components) in the U.S. as it suffers from the 9/11 attacks, which is a milestone of literature on the economic consequences of terrorism. We analyze the time-varying effects of terrorism on economic growth and its components in the U.S. for the period of 1970:Q1-2020:Q4 with the nonlinear Time-Varying Parameter Structural Vector Autoregression (TVP-SVAR) model. We construct an index over the values of all measurable dimensions (the number of terrorist incidents, the number of deaths, and the number of injured) of the terrorist acts carried out in the USA. The results show that the time factor is important in revealing the economic consequences of terrorism in the USA. In addition, the effects of terrorism on economic growth and its components have changed significantly in the periods before/after 11/9 and in the short/long term. These results point out the importance of designing security policies that limit the effects of insecurity and uncertainty created by terrorism on the spending decisions of economic actors. © 2022, Bucharest University of Economic Studies. All rights reserved.

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Keywords
Terrorism, The Components of Economic Growth, Terrorism Index, USA, TVP-SVAR
Citation
Published Version (Please cite this version)