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Terrorism Shocks and Public Spending: Panel VAR Evidence from Europe

  • Konstantinos Drakos
  • Panagiotis Th. Konstantinou

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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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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  1. Wildasin, David E., 2002. "Local Public Finance in the Aftermath of September 11," Journal of Urban Economics, Elsevier, vol. 51(2), pages 225-237, March.
  2. M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar.
  3. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  4. Patrick Lenain & Marcos Bonturi & Vincent Koen, 2002. "The Economic Consequences of Terrorism," OECD Economics Department Working Papers 334, OECD Publishing.
  5. Martin Eichenbaum & Jonas Fisher, 2004. "Fiscal Policy in the Aftermath of 9/11," NBER Working Papers 10430, National Bureau of Economic Research, Inc.
  6. 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.
  7. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  8. 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.
  9. 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.
  10. Tilman Br├╝ck & 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. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
  12. 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.
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