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Daily and monthly costs of terrorism on Pakistani exports

Listed author(s):
  • Mamoon, Dawood
  • Akhtar, Sajjad
  • Hissam, Saadia

This is first of its kind empirical study on the costs of terrorism on Pakistan’s exports. The analysis finds that intensity of terrorist activity can be divided into three distinct periods. The LAL Masjid incident in mid 2007 marks the first sign of intensification of terrorism in Pakistan. The second one is the assassination of Benazir Bhutto. The third one comes in 2008 when the US announced to shift gear from Iraq to Afghanistan and incumbent government in Pakistan created a political support for armed action within Pakistani borders against the terrorists. The analysis finds that terrorism has more significant affect on Pakistani exports post Benazir assassination. The report calculates the monthly and daily costs of terrorism. On average there are 2 terrorist attacks every day whereas 5 citizens on average die in these attacks. A single terrorist attack costs 12 million dollars to the exports. Post Benazir assassination the costs rise to 18 million dollars due to increased intensity where not only the death toll on average has risen but the number of terrorist attacks have gone up. Average per month loss in exports due to terrorism is calculated to be around 500 million dollars. Pakistan in 2006-09 has lost nearly 30 billion dollars in exports as its market shares have fallen. Part of this loss is explained by terrorism, where we find that 18 billion dollars accounts for it. Please note that extending the data for later years may make our results more pronounced but suffice to say our calculated β’s are robust capable of predicting terrorism for coming years. For example, it is found out that costs of number of deaths and number of injured are different while exports are more sensitive to the former capturing severity of casualties that is the hall mark of extreme terrorist actions like suicide attacks.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 30926.

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Date of creation: 15 May 2011
Handle: RePEc:pra:mprapa:30926
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  1. Malcolm Knight & Norman Loayza & Delano Villanueva, 1996. "The Peace Dividend: Military Spending Cuts and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 43(1), pages 1-37, March.
  2. Arunatilake, Nisha & Jayasuriya, Sisira & Kelegama, Saman, 2001. "The Economic Cost of the War in Sri Lanka," World Development, Elsevier, vol. 29(9), pages 1483-1500, September.
  3. Bruno S. Frey & Simon Luechinger, "undated". "How to Fight Terrorism: Alternatives to Deterrence," IEW - Working Papers 137, Institute for Empirical Research in Economics - University of Zurich.
  4. Nitsch, Volker & Schumacher, Dieter, 2004. "Terrorism and international trade: an empirical investigation," European Journal of Political Economy, Elsevier, vol. 20(2), pages 423-433, June.
  5. Drakos, Konstantinos & Kutan, Ali M., 2001. "Regional effects of terrorism on tourism: Evidence from three Mediterranean countries," ZEI Working Papers B 26-2001, University of Bonn, ZEI - Center for European Integration Studies.
  6. Enders, Walter & Sandler, Todd & Parise, Gerald F, 1992. "An Econometric Analysis of the Impact of Terrorism on Tourism," Kyklos, Wiley Blackwell, vol. 45(4), pages 531-554.
  7. Jason Bram & Andrew F. Haughwout & James A. Orr, 2002. "Has September 11 affected New York City's growth potential?," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 81-96.
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