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The Economic Consequences of Terrorism

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  • Patrick Lenain
  • Marcos Bonturi
  • Vincent Koen

Abstract

The unprecedented 11 September 2001 terrorist attacks in the United States caused massive casualties and damage, and ushered in an era of greater uncertainty. While a prompt and vigorous policy response helped limit the immediate economic impact of the aggression, the heightened terrorist threat has some long-lasting, if diffuse, macroeconomic repercussions. Three channels of influence are explored in this paper: shrinking insurance coverage stemming from the perception of greater risk, higher trade costs possibly affecting international trade, and stepped-up security spending partially rolling back the “peace dividend” of the 1990s. It is argued that, in the absence of new large-scale terrorist attacks, and provided terrorism risk is dealt with efficiently, the net long-run macroeconomic impact is probably tangible but limited ... Les conséquences économiques du terrorisme Les attentats sans précédent du 11 septembre 2001 aux États-Unis ont causé des pertes humaines et des dégâts matériels énormes, et ont inauguré une ère de plus grande incertitude. Si une réponse rapide et vigoureuse des responsables a aidé à limiter l’impact économique immédiat de l’agression, le renforcement de la menace terroriste a des répercussions macroéconomiques durables, quoique diffuses. Trois canaux d’influence sont examinés dans la présente étude : une couverture d'assurance réduite résultant de la perception de risque plus important, des coûts de transaction plus élevés pouvant affecter le commerce international, et une augmentation des dépenses de sécurité renversant partiellement le « dividende de la paix » des années 90. Il en ressort qu’en l’absence de nouvelles attaques de grande ampleur, et à condition que le risque terroriste soit géré efficacement, l’impact macroéconomique net à long terme est probablement tangible mais limité ...

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File URL: http://dx.doi.org/10.1787/511778841283
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 334.

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Date of creation: 17 Jul 2002
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Handle: RePEc:oec:ecoaaa:334-en

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Keywords: monetary policy; transport; security; defence; uncertainty; fiscal policy; terrorism; insurance; assurance; sécurité; politique budgétaire; politique monétaire; transport; défense; terrorisme; incertitude;

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Cited by:
  1. Li, Sali & Tallman, Stephen B. & Ferreira, Manuel P., 2005. "Developing the eclectic paradigm as a model of global strategy: An application to the impact of the Sep. 11 terrorist attacks on MNE performance levels," Journal of International Management, Elsevier, vol. 11(4), pages 479-496, December.
  2. Turvey, Calum G. & Onyango, Benjamin M. & Hallman, William K. & Condry, Sarah C., 2007. "Consumers' Perception of Food-System Vulnerability to an Agroterrorist Attack," Journal of Food Distribution Research, Food Distribution Research Society, vol. 38(3), November.
  3. Mirko Draca & Steve Machin & Robert Witt, 2008. "Panic on the streets of London: police, crime and the July 2005 terror attacks," LSE Research Online Documents on Economics 19632, London School of Economics and Political Science, LSE Library.
  4. Konstantinos Drakos & Panagiotis Th. Konstantinou, 2011. "Terrorism Shocks and Public Spending: Panel VAR Evidence from Europe," Economics of Security Working Paper Series 48, DIW Berlin, German Institute for Economic Research.
  5. Friedrich Schneider & Tilman Brück & Daniel Meierrieks, 2011. "The Economics of Terrorism and Counter-Terrorism: A Survey (Part II)," Economics of Security Working Paper Series 45, DIW Berlin, German Institute for Economic Research.
  6. John Garvey & Martin Mullins, 2009. "An Examination of "New" and "Old" Terrorism Using High-Frequency Data," Economics of Security Working Paper Series 18, DIW Berlin, German Institute for Economic Research.
  7. Tilman Brück, 2004. "An Economic Analysis of Security Policies," HiCN Working Papers 06, Households in Conflict Network.
  8. Chesney, Marc & Reshetar, Ganna & Karaman, Mustafa, 2011. "The impact of terrorism on financial markets: An empirical study," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 253-267, February.
  9. Michael Hüther & Joachim Ahrens & Wilhelm Ruprecht & Michael Wolgast & Willi Leibfritz, 2003. "Weltwirtschaftliche Folgen des Terrorismus - mittel- und langfristige Perspektiven," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 56(02), pages 3-20, 01.
  10. Howard Kunreuther & Erwann Michel-Kerjan & Beverly Porter, 2003. "Assessing, Managing, and Financing Extreme Events: Dealing with Terrorism," NBER Working Papers 10179, National Bureau of Economic Research, Inc.
  11. Tavares, Jose, 2004. "The open society assesses its enemies: shocks, disasters and terrorist attacks," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1039-1070, July.
  12. Tilman Brück & Bengt-Arne Wickström, 2004. "The Economic Consequences of Terror: A Brief Survey," HiCN Working Papers 03, Households in Conflict Network.

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