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Effects of Neighboring Nation Terrorism on Imports

Author

Listed:
  • Subhayu Bandyopadhyay
  • Hristos Doucouliagos
  • Cong S. Pham

Abstract

We present a monopolistic competition model to analyze the effects of own nation and neighboring nation terrorism on a nation’s imports. The theoretical analysis shows that own nation terrorism may leave relative price of imports unaffected, but neighboring nation terrorism must raise the relative price, reducing imports. We find that a 10% increase in terrorist attacks in a neighboring nation reduces a country’s imports from the rest of the world by approximately $320 million USD, on average. Mediation analysis shows that trading delays is a potential channel of transmission of trade costs of terrorism to a neighbor.

Suggested Citation

  • Subhayu Bandyopadhyay & Hristos Doucouliagos & Cong S. Pham, 2019. "Effects of Neighboring Nation Terrorism on Imports," Working Papers 2019-017, Federal Reserve Bank of St. Louis, revised 03 Feb 2020.
  • Handle: RePEc:fip:fedlwp:2019-017
    DOI: 10.20955/wp.2019.017
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    References listed on IDEAS

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    1. José de Sousa & Daniel Mirza & Thierry Verdier, 2009. "Trade and the Spillovers of Transnational Terrorism," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 145(IV), pages 453-461, December.
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    More about this item

    Keywords

    Terrorism; Spillovers; Bilateral imports;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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