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Risk of catastrophic terrorism: an extreme value approach

Author

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  • Hamid Mohtadi
  • Antu Panini Murshid

    (Department of Economics, University of Wisconsin-Milwaukee, Milwaukee, WI, USA)

Abstract

This paper models the stochastic behavior of large-scale terrorism using extreme value methods. We utilize a unique dataset composed of roughly 26,000 observations. These data provide a rich description of domestic and international terrorism between 1968 and 2006. Currently, a credible worst-case scenario would involve losses of about 5000 to 10,000 lives. Also, the return time for events of such magnitude is shortening every year. Today, the primary threat is from conventional weapons, rather than from chemical, biological and|or radionuclear weapons. However, pronounced tails in the distribution of these incidents suggest that this threat cannot be dismissed. Copyright © 2009 John Wiley & Sons, Ltd.

Suggested Citation

  • Hamid Mohtadi & Antu Panini Murshid, 2009. "Risk of catastrophic terrorism: an extreme value approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(4), pages 537-559.
    • Handle: RePEc:jae:japmet:v:24:y:2009:i:4:p:537-559
    DOI: 10.1002/jae.1066
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    References listed on IDEAS

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    1. Walter Enders & Todd Sandler, 1996. "Terrorism and Foreign Direct Investment in Spain and Greece," Kyklos, Wiley Blackwell, vol. 49(3), pages 331-352, August.
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    4. Neil Johnson & Michael Spagat & Jorge A. Restrepo & Nicolás Suárez, 2005. "From old wars to new wars and global terrorism," Documentos de Economía 2745, Universidad Javeriana - Bogotá.
    5. Walter Enders & Todd Sandler, 2000. "Is Transnational Terrorism Becoming More Threatening?," Journal of Conflict Resolution, Peace Science Society (International), vol. 44(3), pages 307-332, June.
    6. Kunreuther, Howard & Meszaros, Jacqueline & Hogarth, Robin M. & Spranca, Mark, 1995. "Ambiguity and underwriter decision processes," Journal of Economic Behavior & Organization, Elsevier, vol. 26(3), pages 337-352, May.
    7. repec:bla:kyklos:v:49:y:1996:i:3:p:331-52 is not listed on IDEAS
    8. Blomberg, S. Brock & Hess, Gregory D. & Orphanides, Athanasios, 2004. "The macroeconomic consequences of terrorism," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1007-1032, July.
    9. Enders, Walter & Sandler, Todd, 2000. "Is Transnational Terrorism Becoming More Threatening? A Time-Series Investigation," Staff General Research Papers Archive 1823, Iowa State University, Department of Economics.
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    Cited by:

    1. Hamid Mohtadi, 2017. "Risk‐Mitigating Policies and Adversarial Behavior: Case of Backlash," Risk Analysis, John Wiley & Sons, vol. 37(3), pages 459-470, March.
    2. Miguel Carvalho & António Rua, 2014. "Extremal Dependence in International Output Growth: Tales from the Tails," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(4), pages 605-620, August.
    3. Mohamed Ayadi & Mohamed Salah Matoussi, 2007. "The Impact of Higher Water Costs on the Export of Tunisian Dates and Citrus," Working Papers 718, Economic Research Forum, revised 01 Jan 2007.
    4. Chen Wang & Vicki M. Bier, 2013. "Expert Elicitation of Adversary Preferences Using Ordinal Judgments," Operations Research, INFORMS, vol. 61(2), pages 372-385, April.
    5. Chao Huang & Jin-Guan Lin & Yan-Yan Ren, 2013. "Testing for the shape parameter of generalized extreme value distribution based on the $$L_q$$ -likelihood ratio statistic," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 76(5), pages 641-671, July.
    6. Chao Huang & Jin-Guan Lin, 2014. "Modified maximum spacings method for generalized extreme value distribution and applications in real data analysis," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 77(7), pages 867-894, October.
    7. Hamid Mohtadi & Bryan S. Weber, 2021. "Catastrophe And Rational Policy: Case Of National Security," Economic Inquiry, Western Economic Association International, vol. 59(1), pages 140-161, January.

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    More about this item

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C0 - Mathematical and Quantitative Methods - - General
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics

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