Under attack: Terrorism and international trade in France, 2014–2016

Abstract

Terrorist events typically vary along many dimensions, making it difficult to identify their economic effects. This paper analyses the impact of terrorism on international trade by examining a series of three large-scale terrorist incidents in France over the period from January 2015 to July 2016. Using firm-level data at monthly frequency, we document an immediate and lasting decline in cross-border trade after a mass terrorist attack. According to our estimates, France’s trade in goods, which accounts for about 70% of the country’s trade in goods and services, is reduced by more than 6 billion euros in the first 6 months after an attack. The reduction in trade mainly takes place along the intensive margin, with particularly strong effects for partner countries with low border barriers to France, for firms with less frequent trade activities and for homogeneous products. A possible explanation for these patterns is an increase in trade costs due to stricter security measures.

Impact of terror on international trade in financial services: Does the development of financial institutions matter?

“…(2018) find that a 1% change in transnational terrorism results in a 0.068% change in commodity trade. Our findings, however, are in line with Nitsch and Rabaud's (2022) evidence of a 2.07% (2.53%) decline in French's imports (exports) in the month of recent terrorist attacks. In absolute economic terms, we document a reduction in financial service trade of approximately $US1.25 million to $US1.45 million per annum based on the average annual trade in financial service value of $US70.8 million.…”

“…For example, terror attacks in both the exporting countries and their neighbouring countries reduce US imports (De Sousa et al., 2009). French cross‐border trade also suffers from an immediate and lasting decline following a major terrorist incident, estimated to be approximately 6 billion euros in the first 6 months of an attack (Nitsch & Rabaud, 2022). Available empirical evidence, however, is restricted to aggregate trade or trade in goods.…”