IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Fiscal Consequences of Armed Conflict and Terrorism in Low- and Middle-Income Countries

  • Benedict J. Clements
  • Sanjeev Gupta
  • Shamit Chakravarti
  • Rina Bhattacharya
Registered author(s):

    This paper analyses the fiscal effects of armed conflict and terrorism on low- and middle-income countries. An analysis of 22 conflict episodes shows that armed conflict is associated with lower growth and higher inflation, and has adverse effects on tax revenues and investment. It also leads to higher government spending on defense, but this tends to be at the expense of macroeconomic stability rather than at the cost of lower spending on education and health. Our econometric estimates are consistent with the hypothesis that conflict and terrorism have a significant negative impact on growth through changes in the composition of government spending. On the revenue side, the fiscal accounts are affected only through reduced real economic activity. Thus there is potential for a sizable "peace dividend" for countries that are able to resolve conflict and terrorism.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=16022
    Download Restriction: no

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/142.

    as
    in new window

    Length: 28
    Date of creation: 01 Aug 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/142
    Contact details of provider: Postal: International Monetary Fund, Washington, DC USA
    Phone: (202) 623-7000
    Fax: (202) 623-4661
    Web page: http://www.imf.org/external/pubind.htmEmail:


    More information through EDIRC

    Order Information: Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Addison, Tony & Chowdhury, Abdur R. & Murshed, S. Mansoob, 2002. "By How Much Does Conflict Reduce Financial Development?," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    2. Malcolm D. Knight & Delano Villanueva & Norman Loayza, 1995. "The Peace Dividend; Military Spending Cuts and Economic Growth," IMF Working Papers 95/53, International Monetary Fund.
    3. International Monetary Fund, 2000. "Corruption and Military Spending," IMF Working Papers 00/23, International Monetary Fund.
    4. Dani Rodrik, 1998. "Where Did All The Growth Go? External Shocks, Social Conflict, and Growth Collapses," NBER Working Papers 6350, National Bureau of Economic Research, Inc.
    5. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
    6. Benoit, Emile, 1978. "Growth and Defense in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 26(2), pages 271-80, January.
    7. Ozler, Sule & Tabellini, Guido, 1991. "External Debt and Political Instability," CEPR Discussion Papers 582, C.E.P.R. Discussion Papers.
    8. Bevan, David L., 2001. "The Fiscal Dimensions of Ethiopia's Transition and Reconstruction," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    9. Volker Nitsch & Dieter Schumacher, 2003. "Terrorism and Trade," Discussion Papers of DIW Berlin 353, DIW Berlin, German Institute for Economic Research.
    10. Nisha Arunatilake & Sisira Kumara Jayasuriya & Saman Kelegama, 1999. "The Economic Cost of the War in Sri Lanka," Working Papers 1999.10, School of Economics, La Trobe University.
    11. Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-55, June.
    12. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
    13. David E. Bloom & Jeffrey D. Sachs, 1998. "Geography, Demography, and Economic Growth in Africa," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 207-296.
    14. Ndikumana, Leonce, 2001. "Fiscal Policy, Conflict, and Reconstruction in Burundi and Rwanda," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    15. Bart Hobijn, 2002. "What will homeland security cost?," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 21-33.
    16. By Davoodi & Benedict Clements & Jerald Schiff & Peter Debaere, 2001. "Military Spending, the Peace Dividend, and Fiscal Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 48(2), pages 4.
    17. Bloom, David E & Williamson, Jeffrey G, 1998. "Demographic Transitions and Economic Miracles in Emerging Asia," World Bank Economic Review, World Bank Group, vol. 12(3), pages 419-55, September.
    18. Roubini, Nouriel, 1991. "Economic and political determinants of budget deficits in developing countries," Journal of International Money and Finance, Elsevier, vol. 10(1, Supple), pages S49-S72, March.
    19. Alberto Abadie & Javier Gardeazabal, 2001. "The Economic Costs of Conflict: A Case-Control Study for the Basque Country," NBER Working Papers 8478, National Bureau of Economic Research, Inc.
    20. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June.
    21. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
    22. Jerald Alan Schiff & Tamim Bayoumi & Daniel P. Hewitt, 1993. "Economic Consequences of Lower Military Spending; Some Simulation Results," IMF Working Papers 93/17, International Monetary Fund.
    23. Venieris, Yiannis P & Gupta, Dipak K, 1986. "Income Distribution and Sociopolitical Instability as Determinants of Savings: A Cross-sectional Model," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 873-83, August.
    24. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
    25. Addison, Tony & Murshed, S. Mansoob, 2001. "The Fiscal Dimensions of Conflict and Reconstruction," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:02/142. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)

    or (Hassan Zaidi)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.