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Assessing the Impact of Terrorism in Trade Development in the SADC Region: A Gravity Model Approach

Author

Listed:
  • Stacy Julius

    (School of International Trade and Economics, Dongbei University of Finance and Economics, Dalian, China.)

  • Nnanna P. Azu

    (Department of Economics, Nile University of Nigeria, Abuja, Nigeria.)

  • Maimuna Y. Muhammad

    (Department of Economics, Nile University of Nigeria, Abuja, Nigeria.)

Abstract

The South African Development Community (SADC) was formed with the objective of achieving development, peace and security, and economic growth but terrorism has been a major obstacle. This paper captured terrorism as a trade cost to bilateral trade in the region. The PPML technique was used for the analyses because of its robustness, consistency and ability to capture zero trades and appropriate fixed effects. Our analyses revealed that, terrorism must have caused an increase in bilateral trade in the region and were dependent on the level of income of trading partners. Trade with low-and medium-income countries were positively influenced by terrorism primarily because their production capacity must have been damaged by terrorism and the only way to augment domestic demand was to depend on international trade. But the region?s trade with high-income countries was negatively affected by terrorism. Partly because their capacity to produce for export must have been affected and raising insurance premiums for goods that are shipped to higher-risk nations may also hinder trade. Based on the coefficients, the impacts of terrorism on bilateral trade appear very small but not negligible.

Suggested Citation

  • Stacy Julius & Nnanna P. Azu & Maimuna Y. Muhammad, 2019. "Assessing the Impact of Terrorism in Trade Development in the SADC Region: A Gravity Model Approach," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(10), pages 1147-1159, October.
  • Handle: RePEc:asi:aeafrj:2019:p:1147-1159
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    References listed on IDEAS

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    More about this item

    Keywords

    Terrorism; Trade; SADC; Gravity; Poisson; Regional trade agreement.;
    All these keywords.

    JEL classification:

    • C59 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Other
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F18 - International Economics - - Trade - - - Trade and Environment

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