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Terrorism Shocks and Public Spending: Panel VAR Evidence from Europe

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Author Info

  • Konstantinos Drakos
  • Panagiotis Th. Konstantinou

Abstract

Based on a trivariate panel VAR and utilizing Generalized Impulse Responses, we explored the dynamic impacts of terrorism and crime risks on public order and safety spending across European countries during the period 1994-2006. Our findings suggest that both a shock in terrorism risk or in crime, significantly increase the subsequent trajectory of public order and safety spending. As a by-product we find that public spending is ineffective in reducing observed crime or terrorism risks.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.372931.de/diw_econsec0048.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Economics of Security Working Paper Series with number 48.

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Length: 27 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diweos:diweos48

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Related research

Keywords: Panel VAR; Public Order and Safety Spending; Terrorism Activity;

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References

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Patrick Lenain & Marcos Bonturi & Vincent Koen, 2002. "The Economic Consequences of Terrorism," OECD Economics Department Working Papers 334, OECD Publishing.
  3. Bruck, Tilman & Wickstrom, Bengt-Arne, 2004. "The economic consequences of terror: guest editors' introduction," European Journal of Political Economy, Elsevier, vol. 20(2), pages 293-300, June.
  4. David Wildasin, 2001. "Local Public Finance in the Aftermath of September 11," Public Economics 0112005, EconWPA.
  5. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
  6. Martin Eichenbaum & Jonas Fisher, 2004. "Fiscal Policy in the Aftermath of 9/11," NBER Working Papers 10430, National Bureau of Economic Research, Inc.
  7. Kollias, Christos & Messis, Petros & Mylonidis, Nikolaos & Paleologou, Suzanna-Maria, 2009. "Terrorism and the effectiveness of security spending in Greece: Policy implications of some empirical findings," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 788-802, September.
  8. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
  9. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  10. Tilman Brück & Marie Karaisl & Friedrich Schneider, 2008. "A Survey of the Economics of Security," Economics of Security Working Paper Series 1, DIW Berlin, German Institute for Economic Research.
  11. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
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Cited by:
  1. Michael Brzoska & Raphael Bossong & Eric van Um, 2011. "Security Economics in the European Context: Implications of the EUSECON Project," Economics of Security Working Paper Series 58, DIW Berlin, German Institute for Economic Research.

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