International terrorism as a trade impediment? : conference paper

Earlier work established the notion that international terrorism harms international trade. This evidence was based on annual data with responses in the same year as attacks and incidents and on empirical models which ignored general equilibrium effects. We provide evidence that, if at all, international terrorism displays effects on bilateral and multilateral trade only in the medium run (more than one-and-a-half years after an attack/incident). The findings in this paper suggest that the purely economic short-run impact of international terror on trade is negligible. This does not mean that terror is unimportant. However, its effects should not be looked for in the purely economic domain or in the short run but in economic outcome in the long run and in the disruption of humanitarian and social wellbeing both of which cannot be grasped when looking at economic activity alone.