The Endogenous and Non‐linear Relationship Between Terrorism and Economic Performance: Turkish Evidence

Brutality or Frequency?

“…Our empirical results show that the magnitude of the negative effect of terrorism on economic growth is greater during high growth periods. This result is consistent with Araz-Takay, Arin and Omay [2009], who document a similar result in Turkey. This seems to suggest that policy-makers should be even more concerned about the intensification of terrorist activities as this could hold back, to some extent, the economy in the presence of high economic growth.…”

“…As there is evidence that the magnitude of fiscal multipliers are different in expansionary and recessionary periods (Auerbach and Gorodnichenko [2012]), one may expect the magnitude of effects of terrorism on growth to differ in expansionary and recessionary periods as well. This hypothesis was previously documented by Araz-Takay, Arin and Omay [2009] using a smooth-transition VAR model which showed that the effects of terrorism on real economic activity are larger in magnitude during expansionary periods. 1 We aim to contribute to the literature in three ways.…”

Does Income Inequality Derive the Separatist Terrorism in Turkey?

“…The PKK deliberately targets dams, power plants, irrigation networks, etc. Therefore, separatist terrorism has some other direct or indirect effects on economy (Özsoy and Şahin, 2006;Araz-Takay, Arin, and Omay, 2009;Ocal and Yildirim, 2010;Omay, Takay, and Ilalan, 2011).…”

An analysis of a causal relationship between economic growth and terrorism in Pakistan

“…Eckstein and Tsiddon (2004) and Naor (2006) argued that terrorism increases the perceived probability of an untimely death and therefore prompts people to substitute future savings with current consumption in order to enhance utility in the present at the expense of the future which is another cause for decline in economic activity. Araz-Takay et al (2009) investigated the macroeconomic effects of terrorism by controlling for the possible non-linear and endogenous relationship between political conflict and economic activity. They confirmed that terrorism has a large significant negative impact on economic activity and the impact is more severe during expansionary periods, and that the impact of economic activity on terrorism is significant only in recessionary periods.…”