Working Paper Revision

Effects of Neighboring Nation Terrorism on Imports

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.

Keywords: Terrorism; Spillovers; Bilateral imports;

JEL Classification: D74; F14; H56;

https://doi.org/10.20955/wp.2019.017

Status: Published in Southern Economic Journal

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2020-02-03

Number: 2019-017

Note: Publisher DOI: https://doi.org/10.1002/soej.12508

Related Works

• Working Paper Revision (2020-02-03) : You are here.
• Working Paper Original (2019-05-29) : Terror Externalities and Trade: An Empirical Analysis