Terrorism and its impact on the public debt

AymenChamakh
Email:chamakhaymen0@gmail.com

Lamia JaidaneMazigh
Email: mazighlamia@gmail.com

Abstract

This paper investigates the macroeconomic cost of terrorism, in particular its impact on public
debt. Using an unbalanced panel data set off 13 countries from2002 to 2015 with AMG and
PMG estimators, we find that an increase on Global Terrorism Index raises the ratio of Debt
and decrease sovereign rating. These effects are more marked for highly indebted countries.
Moreover, our results show that terrorism has greater effect on sovereign rating than on ratio
of debt. So we conclude that terrorism the effects of short term are much more important than
those of long term.

Keys words : Terrorism, public debt, debt cost, AMG and PMG
Introduction

There is not a universal agreement on the definition of terrorism. Various legal systems and
government agencies use different definitions. The Institute for the economy and peace (IEP)
defines terrorism as “the threatened or actual use ofillegal force and violence by a non-state
actor to attain a political, economic, religious, or social goal through fear, coercion, or
intimidation”.The Council Resolution of safety of the United Nations defines terrorism as
“criminal acts, including against civil, made in the intention to cause death, of the serious
body lesions or the taking of hostages, with an aim of causing a state of terror in general
public or a group of people or people in particular or of forcing a government or an
international organization to make or to abstain from any act”. In this work we follow
definition IEP because it is used in the economic literature.
There is a long tradition among the economists to try to understand the economic
repercussions of the conflicts and peace. Following the First World War and before the
Second World War, several economists of foreground, who’s Keynes (1919), Pigou (1940)
endeavored to recall the interactions between the war, the peace and the economic situation of
their time.However, economic terrorism and in particular its repercussions received less
importance in the economic literature. On the other hand, the attacks of 11September,
terrorism drew the attention of the economists thanks to the sensitizing increased at the human
cost associated this phenomenon and at the significant reorientation of the economic
resources, probably moved by the perceived risks associated possible future terrorist
incidents.

Before being delayed there more in detail, we can say that terrorism affects the economy
according to several manners. Initially, the terrorist incidents generate the loss of the human
life and damage the infrastructures. Then, it is associated a reduction inforeign capital flows
by causing a fall of the tourist frequentation and volume of the foreign directinvestments.
After, the danger influences the practices of the private individuals as regards consumption,
economy and investments, which involves a distortion of the allowances of the resources in
the touched nations. Lastly, the reinforcement of the safety measures generates indirect
costs.(Enders and Sandler, 1996; Abadie and Gardeazabal, 2008).
In this work, we try to analyze the effect of terrorism on the national debt of a whole of the
heterogeneous country composed of the countries of the area MENA (Saudi Arabia, Bahrain,
Kuwait, Egypt, Jordan, Lebanon, Morocco, Tunisia and Turkey) and certain developed
countries (France, Spain, Ireland and the United States). Then, we chose these countries
because of the concentration of terrorism in these areas first of all and the availability of the
data for the two variables: index of terrorism and the sovereign note. We worked over the
period of 2002 to 2015 characterized by a remarkable increase in the terrorist incidents.

This paper is structured as follows: the next section looks at the relevant literature in
terrorism,followed by a discussion of the data, control variables and estimation/methodology
we employ, the main results. Finally, we conclude by highlighting the main takeaways as well
as opportunities for future research.

Economic cost of terrorism: Literature review

Although there are several research on the subject of the terrorism, which, its history and the
nature of its major causes, as well as the vast one finely of their costs, the field of research in
which we are exclusively interested by the macroeconomic and financial costs in particular on
the public debt.

Existing research on this subject generally treats indirect costs of terrorism and can be
classified in three under-components for purposes of this article, namely (I) the effect of
terrorism on specific macroeconomic indicators, (II) the short-term effect (III) the longer-term
implications of terrorism on the capital markets. Undoubtedly, there is a fine line between the
last two under-components and they could be combined in one, but we choose to differentiate
them differently which effects on the macroeconomic variables which translate the effect as
regards volume of public debt and the repercussions over the debt cost.

Terrorism and public deficit

Terrorist acts have consequences for economic growth. They will create a climate of
uncertainty and fear that will affect the business climate, negatively impacting economic
activity. Terrorism affects economic growth through the redirection of resources away from
investment spending to less productive spending (Blomberg et al, 2004). According to
Abadieand Gardeazabl (2008), this phenomenon leads to a movement of capital globally
through its effects on foreign direct investment and portfolio investment. Terrorist incidents
lead to: i) a reduction in the stock of capital (human and physical), ii) higher uncertainty, iii)
an increase in anti-terror spending, iv) a negative effect on specific industries such as tourism,
transport etc.

Shahbaz et al (2013) have studied the causal relationship between terrorism and growth, they
have shown the existence of a negative long-term relationship and even the causality can be
reversed, the growth causes terror by the unequal distribution of income and the increase in
unemployment. Terrorism disadvantages savings through consumer arbitrage that entails

Sandler and Enders (1996) indicate that the terrorist incidents in Spain and Greece cause a
drop of the FDI of 13.5% and 11.9% per annum respectively and 488.9 million $ in Spain,
383.5 million $ in Greece (equivalent with 7.6%, 34.8% respectively of the rough formation
of the fixed capital).

Nitsch and Schumacher (2004) showed that terrorism is associated with a reduction of the
bilateral trade and they suggest that the doubling of the incidents during one year reduces the
volume of trade of 4%.

Mirza and Verdier (2008) affirm that terrorism generates anxiety and risks because of
uncertainty on the economic outputs and the transactions which it creates (reduction and
change in the investments, the request and of the implications for the commercial
transactions). According to them the terrorist activity has a direct effect on the costs of
transactions and two indirect effects, on the one hand its impact on the policies of fight
against terrorism and on the other hand its impact on the GDP.

The governments play an important part in public safety through their expenditure in order to
detect and answer the terrorist attacks. Terrorism raises several problems with the
nations.Wildasin et al (2002) described the adjustment of public finances after the 11/9
attacks on the part of the United States from three types of policies. First explicit subsidies of
$ 15 billion in financial relief for airlines and airport security plus other subsidies granted to
the private sector, only in the city of New York. Other states have benefited from other grants
to strengthen the capacity of local authorities in counter-terrorism activity.

Enders, Sandler and Parise (1992) using an econometric analysis, estimated the loss in
Austria, Greece and Italy from 532 to 3372 million euros between 1968 and 1988.Arana and
Leon (2007) studied the impact of the attacks of September 11 on the tourist request using an
approach with discrete choice they found that these attacks caused a shock with the utility of
the tourists and a change in the profile of image of the destinations. The reduction in the
utility is caused by the state of anxiety around this industry. These attacks involve also a
significant reduction in surplus awaited of the consumers to obtain each attribute
characterizing the destinations and consequently the rate of substitution tends to the rise.

Gupta et al. (2004) affirmed that the terrorist activity is associated a weak economic growth,
inflation raised, drops on the level of the revenues from taxes, the investment and an increase
in the public expenditure. According to these authors terrorism and the conflicts affect the
budgetary situation of the State through three channels, by disturbing the economic activity,
eroding the taxability and by deforming the composition of the public expenditure.

Drakos and Panagiotis (2014), found that the response of law and order and safety the
expenditure is positive after a terrorist shock which increases the expenditure by 0.05% and
they proved that the effect of ousting involves is in two ways, the reduction of the resources
devoted to the other uses and a fall of the private expenditure.

Since resorting to money creation or raising taxes is not always easy to undertake.
Governments often choose indebtedness to finance the deficits caused by the increase in
security expenditures in response to attacks.

Terrorism and Debt Cost

Merton (1974) explains that the three items upon which the value of a sovereign bond would
depend are: (a) the required rate of return on riskless bonds, (b) the terms of the indenture and
(c)the risk of default. Consequently any change of default risk involves variations in the bond
yieldmoreover the default risk is generally influenced by economic and political factors.
Among the variables which affect the risk of default is political stability. Thus terrorism
affects the political stability of a country that translates by changes on the level of the yields
of the bond-holders.

Gully and Sultan (2006) are the first which study the relation between the terrorist activity and
the bond market. Their conclusion checks the assumption according to which terrorism affects
financial market negatively. In addition they considered that the response of bonds yields is
delicate and depends on type of selected obligation index. They noted that because of the
phenomenon of flight to qualitythe answer can be positive or negative.
Haddad and Hakim (2007) examined the cost of the sovereign loans in the MENA area after
the attacks of 11/9, by using sovereignspreads to evaluate the sovereign risk. They showed
that after the attacks the sovereign spreads increase in means 135 basis points.Moreover
Haddad and Hakim (2008) studied the impact of the wars and of terrorism on the sovereign
risk of the MENA area more Turkey, Brazil andSouth Africa. They noted that an
improvement of 1 point offreedomindex cause a drop in theloan cost of 111 basis points on
the world bond markets. Then, their result shows that only Turkey is affected by the war in
Iraq since its loan cost was raised with 233pb. Lastly, they concluded that the war does not
have an important effect on the area but in certain cases the perception of themarket actors
could lead to possibilities of arbitration of the sovereign spreads of a country.

Goldman (2015) studied the effect of the terrorism measured by the number of fate caused by
this phenomenon on the bonds yields he showed that the increase in a number of fate is
associated high yield. Lastly, he concludedthat the positive relation between the cost of the
debt and terrorism is generally explained by the effect of terrorism on the default risk.
Whereas the relation reverses with theloan cost because offlight to quality is not true that on
the national level of the countries.

Procasky and Ujah (2016) analyzed the relation between the terrorism and the debt cost.
Using a sample of 102 countries, they showed that any increase in the terrorismindex of 2
points on the scale of 10 is associated on average with a change with prospect for the rating
for a country. Moreover this impact is pronounced much more in the developing countries,
they noted that the same increase is associated a total fall of sovereign credit, for example of
BB with BB-.

Data/Methodology

Data and sources

In this section, we examine the data sources which we use for theindependent variable of
interest relating to the terrorist activity, the sovereign rating relating to the debtcost and the
debt ratio relating to the volume of the debt likedependent variables, the controlling variables
whose explanatory value was shown for the sovereign rating and the debt ratio. All the
variables and their sources are described below in Table1.
Debt ratio

The debt ratio expressed as a percentage of GDP is the total amount of the public loans on the
GDP. It is regarded as an indicator of the health of an economy and a key factor for the
viability of the publicfinance.

Credit rating

The sovereign rating of the countries is the note allotted to the debt of a country or a
sovereign entity. The sovereign rating gives to the investors an outline of the level of risk
associated with the investment in a particular country and also involves political risks. Since
this variable is of qualitative nature, we used the method of Klock et al (2005) and Ujah et al
(2015) to return it in a quantitative variable by converting the letters to figures of 1 (default)
to 22 (Aaa). In this work we use only the notes of the Moodey's agency.

Terrorism index

The global terrorism index is calculated by the Institute for the economy and peace (IEP). It is
the first index of terrorism systematically to classify the countries affected by terrorism by
integrating at the same time economic and social dimensions. That is done by producing a
composite score for each nation. Although the index measures the direct physical impact of
terrorism, it also integrates the psychological effect, or the indirect effect, by balancing the
final composite score by the sudden damage during previous years (previous years having a
weaker weighting). The index is based on the data collected by “National Consortium for the
Study off Terrorism and Responses to Terror (START)”, and stored in its world data base on
terrorism (“GTD”). The GTD is regarded as the most complete data base on the terrorist
activity in the world and detected more than 104.000 cases of terrorism of 1970. The GTI was
actually created when the IEP was updating the terrorist indicator built-in in its Total Peace
Index, an index similar to that of the GTI, period during which the organization decided to
produce it on an autonomous basis. The index covers 158 countries examined during ten last
years. The countries are evaluated on the basis of four aggregate indicator of physical effect.
It is about the total number of incidents, of the total number of deaths, the total number of
wounds and the sum of the material damages. To take account of the persistent effect of
terrorism, GTI takes into account the scores of the former years and balances them as follows:
current year (52%), previous year (26%), before two years (13%), three years (6%), and
before four years (3%). Lastly, the value of this index ranges between 0and 10.
 Table1: Description of variables

Variables Definition Period Source

DTG Debt-to-GDP ratio 2002 – 2015 IMF (IFS)

NOT Sovereign rating 2002 – 2015 Moodey’s
GTI Global terrorism index 2002 – 2015 IPE
INF Inflation, GDP deflator 2002 – 2015 WDI
(annual %)
LGDPPC Log of GDP per capita 2002 – 2015 WDI
(current US$)
MEXP Militaryexpenditure (% of 2002 – 2015 WDI
GDP)
LTOTR Log of Total reserves
2002 – 3015 WDI
minus gold (current US$)

Control variables

We chose these controlling variables based on work of Gargouri and Ksantini (2016) for the
determinants of the debt ratio. They showed that the variables of the nonperforming loans, the
militaryexpenditure and also the imports of goods and services have a positive and significant
impact on the debt ratio. On the other hand, they proved a negative influence of the GDP
growth, reserves and inflation on the rate of debt. For the sovereign rating we based on work
of Afonso (2003) which identified factors explaining 87% of the variation of the sovereign
solvency, and augmented by Qi and al (2009) and Connolly (2007).

Stationarity analysis

The unit root tests are considered among the most important tests for the economists and in
particular for the econometricians. Indeed the tests most developed in the literature are those
of Levin, Lin and Chu (LLC) (2002) and Im, Pesaran and Shin (IPS) (2003). These tests of
first generation are generally based on the assumption of transversal independency. In this
context, the correlations between units constitute harmful parameters. The assumption of
transversal independency is rather restrictive and somewhat unrealistic person in the majority
of the macroeconomic applications of the unit root tests (Hurlin, 2007).

Table 2 presents the results of some tests of second generation in particular the test of Pesaran
2007. First, we started with the test of Pesaran CD1 in order to test the dependence between
the cross-sectional units. The results of this test reject the null hypothesis of the absence of
dependence (p-value< 1%). For the test of Pesaran (2007), all the computed values are higher
than the breaking value what indicate than all the variables are nonstationary to 1%. Moreover
these variables are stationary in first difference and they are integrated of the same order 1.

Table2: stationarity analysis

Pesaran CD CADF
T-statistic p-value T-statistic critical value
on 1% N,
Variables At level 1st T(13,14)
difference
DTG 5, 017659 0,000 -1,877 -3,049 -2,52

NOT -0,831 -3.005 -2,52

GTI 3,2117532 0,001 -1,839 -3.495 -2,52

INF 6,444554 0,000 -2,362 -2.527 -2,52

MEXP 3,201638 0,001 -1,776 -2.558 -2,52

LGDPPC 27,38427 0,000 -2,249 -2.532 -2,52

LTOTR 15,12492 0,000 -2,235 -2.615 -2,52

1
PesaranCD:The formal statistical procedures designed to test for cross-sectional dependence in panel data. The
CD test is the Lagrange multiplier (LM) test developed by Breusch and Pagan [BP] (1980) often applied when
the time-series dimension T of the panel is larger than the cross sectional dimension N as the case in our data.
The Pesaran's CD statistic is a variant or an alternative to the BP test (LM statistic) which has a mean at exactly
zero for fixed values of T and N, under a wide data space of panel-data models that include
homogenous/heterogeneous dynamic models.
Methodology

We use country level data for the period 2002–2011 to estimate the following AMG and
PMG2 specification for cross-sectional data for these two models.

𝑻𝑫𝑬𝒊𝒕 = 𝜶𝟎𝒊 + 𝜶𝟏𝒊 𝑮𝑻𝑰𝒊𝒕 + 𝜶𝟐𝒊 𝑰𝑵𝑭𝒊𝒕 + 𝜶𝟑𝒊 𝑴𝑬𝑿𝑷𝒊𝒕 + 𝜶𝟒𝒊 𝑳𝑮𝑫𝑷𝑷𝑪𝒊𝒕 + 𝜶𝟓𝒊 𝑳𝑻𝑶𝑻𝑹𝒊𝒕 + ɛ𝒊𝒕

𝑵𝑶𝑻𝒊𝒕 = 𝜶𝟎𝒊 + 𝜶𝟏𝒊 𝑮𝑻𝑰𝒊𝒕 + 𝜶𝟐𝒊 𝑰𝑵𝑭𝒊𝒕 + 𝜶𝟑𝒊 𝑴𝑬𝑿𝑷𝒊𝒕 + 𝜶𝟒𝒊 𝑳𝑮𝑫𝑷𝑷𝑪𝒊𝒕 + 𝜶𝟓𝒊 𝑳𝑻𝑶𝑻𝑹𝒊𝒕 + ɛ𝒊𝒕

In this analysis we use two models on panel data in order to estimate the effect of terrorism on
the debt ratio relative of debt volume. Whereas the second model examinesthe effect on the
sovereign rating which one considers representative of the debtcosts.

Results
Table 3: Effect of terrorism on debt ratio
Variables Coefficient p-value

GTI 0,0326038 0,000

INF -0,0045131 0,334

MEXP 1,357564 0,421

LGDPPC 0,2745773 0,000

LTOTR -0,0866247 0,006

C 0,0425357 0,342

Table 3 summarizes the results of regression for model 1. PMG estimator shows a relation of
long term positive and significant to 1% between the debt ratio and terrorism.We found that
on average, a one-point increase in terrorism on the utilized 10-point scale results an increase
of 0,03% of debt ratio. For the controlling variables, the GDP per capita is positive and
significant, the reserves and inflation are negatively dependent with the national debt. The

2
AMG and PMG are estimators specified with an errors correction model on panel data. The principal advantage
of this approach compared to more traditional formulas, founded on temporal averages, is to offer more freedom
for the choice of dynamics and the degree of heterogeneity between the countries. More they take account of the
independency problem. (Pesaran, Shin and Smith, 1999; Eberhardt and Teal, 2010).
negative relation between the national debt and inflation is generally explained by its effect on
the tax revenues (if inflation increases, the prices increase and the taxes increase). This
reasoning is validfor the debts not indexed to inflation and denominated in national currency
(Pinter, 2014). The military expenditure is nonsignificant.

Table 4: Effect of terrorism on sovereign rating

Variables Coefficient p-value

GTI -0,158507 0,015

INF -0,218363 0,510

MEXP -172,7457 0,172

LGDPPC 2,087048 0,00

LTOTR 0,6391491 0,208

C -15,94331 0,148

Table 4 brings back the estimates for model 2 the results show a negative and significant
correlation between terrorism and the sovereign rating.The effect of terrorism on the credit
rating is more marked than the effect on the debt ratio. That can be explained by the
vulnerability of the default risk to terrorism more than the debt ratio. So wenotice that the
short term effect of terrorism is higher than the long term effect.For control variables,
inflation is insignificant and negatively affects the sovereign rating. Because rising inflation
doesn’t encourage investors to buy bonds issued by a government. Therefore a higher interest
rate and an increase in the cost of debt that contributes to the widening of the budget deficit.
Military spending is insignificant and negatively affects the rating, military spending is one of
the components of public spending which contributes to the widening of budget deficit
resulting in a negative effect on the rating. Per capita GDP and reserves are determinants of
the country's sovereign rating, their increases improve the rating.

Conclusion
In this work, we were interested in the indirect costs of terrorism in particular its effects on
the public debt. Indeed, terrorism initially affects the debt of the countries by its impact on
the public expenditure, in particular the expenditure of defense and safety.In addition, the
terrorist acts influence also the public debt through the raising of the cost of the debt. After
each terrorist event the rating agencies downgrade the sovereign rating of the countries
concerned, thus increasing spreads, and making more difficult the access to the international
financial market.We used Cointégration on panel data by PMG and AMGestimators for a
sample made up of some countries of the MENA area (Saudi Arabia, Bahrain, Kuwait, Egypt,
Jordan, Lebanon, Morocco, Tunisia and Turkey) and some developed countries (France,
Spain, Ireland and the United States). Indeed, we chose these countries because of the
concentration of terrorism in these areas first of all and the availability of the data for the two
variables: index of terrorism and the sovereign rating. We choose the period of 2002 to 2015
characterized by a remarkable increase in the terrorist incidents.

We showed that there is a positive of long termrelation between the terrorism and the debt
ratio.We found that on average, a one-point increase in terrorism on the utilized 10-point scale
results an increase of 0,03% of debt ratio. Moreover we found that terrorism increases default
risk by its effect on the sovereign note, it generates a fall of the note. Indeed, we found that
terrorism affects credit rating more than the debt ratio, which can be explained by the
sensitivity of the risk of defect to this phenomenon.Then, we note that theshort term effects
are much more important than those of long term.
Finally, we believe that the usage of actual sovereign bond yields as opposed to credit ratings
could aid in quantifying the hard cost of terrorism on debt more precisely (although sufficient
data availability and quality on such a broad sample of countries will be a hurdle to
overcome). Finally, it would be instructive to extend the research into the long-term impact of
terrorism into other financial asset classes as well as specific economic sectors on a broad,
granular country bycountry basis (although again, as with sovereign bond yields,
operationalization of this endeavor will have to overcome data availability challenges).
References

Abadie, Alberto, Gardeazabal, Javier, 2008. Terrorism and the world economy. Eur. Econ.
Rev. 52, 237–250.

Afonso, A.(2003), «Understanding the determinants of sovereign debt ratings: evidence for
the two leading agencies»,Journal of Financial Economics. 27, 56–74
.
Aran˜a, J., C. Leo´n,(2007), “Surveyof tourism destination choices”
www.personales.ulpgc.es/jarana.daea/tourism911.pdf

Blomberg, S.B., Hess, G.D., Athanasios, O., (2004). “The macroeconomic consequences of
Terrorism”.Journal of Monetary Economics 51 (2), 1007–1032.

Breusch, T., and Pagan, A. (1980).ëThe Lagrange multiplier test and its applications to model
speciÖcation in econometricsí, The Review of Economic Studies, 47(1): 239ñ253.

Connolly, M, (2007). “Measuring the effect of corruption on sovereign bond ratings”.Journal

of Economic Policy Reform10 (December), 309–323.

Drakos, K .,Konstantinou, T.P. (2014), “Terrorism, Crime and Public Spending: Panel
VAR Evidence from Europe”, Defence and Peace Economics, 4:349-361

Eberhardt, M., Teal. F (2010) “Productivity Analysis in Global Manufacturing Production”,

Economics Series Working Papers 515.

Enders, W., Sandler, T., (1996).“Terrorism and foreign direct investment in Spain and
Greece”. Kyklos 49 (3), 331–352.

Enders, W., Sandler, T., Parise, G.F., (1992). “An econometric analysis of the impact of
terrorism on tourism”.Kyklos 45, 531 – 554.

Goldman.,B,(2015) “Terror Attacks and Bond Yields in the European Union: An

Autogressive Transfer Function Approach”.Advanced Econometrics (ECON 481) Term
Paper.

Gulley, D.,Sultan, J. (2008). “Risk premium, volatility, and terrorism”.New evidence.

Bentley College working paper.

Gupta, S., B. Clements, R. Bhattacharya, and S. Chakravarti, (2004), “Fiscal Consequences of

Armed Conflict and Terrorism in Low- and Middle-Income Countries,” European Journal of
Political Economy, Vol. 20, pp. 403–421.

Haddad, M., Hakim, S, (2008).“The impact of war and terrorism on sovereign risk in the
middle east”.The Journal of Derivatives & Hedge Funds,14 (3/4).

Haddad, M., Hakim, S.. (2007) ‘The Cost ofSovereign Lending in the Middle East after
September11’, Journal for Global Business Advancement, Vol. 01,No. 01, pp. 127–139.
HurlinC.,Mignon V. (2007), “Une Synthèse des Tests de Racine Unitaire en sur Données de
Panel”, Economie et Prévision, 169-171, 251-295.

Im K.S., Pesaran M.H., Shin Y. (2003). “Testing for Unit Roots in Heterogeneous Panels”,
Journal of Econometrics, 115, 1, pp. 53-74.

Keynes, J.M., (1919). “The Economic Consequences of the Peace”.Macmillan, London, UK.

Klock, M.,Mansi, S., Maxwell, W, (2005). “Does corporate governance matter to

bondholders”.Journal of Financial and Quantitative Analysis . 40 (4), 693–719.

Ksantini, M ,Gargouri, I ,(2016). “The Determinants of Public Debt”.The Romanian

Economic Journal, vol. 18, issue 59, 111-124.

Levin A., Lin C.F., Chu C.S.J. (2002).“Unit Root Test in Panel Data: Asymptotic and Finite
Sample Properties”.Journal of Econometrics, 108, pp. 1-24.

Merton, R. (1974) , “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates”,
Journal of Finance, Vol. 29, No. 2 pp. 449-470.

Mirza, D., Verdier, T., (2008).“International trade, security and transnational terrorism:
theory and a survey of empirics”. Journal of Comparative Economics 36 (2),179–194).

Nitsch, V., Schumacher, D (2004), “Terrorism and International Trade: An

EmpiricalInvestigation,” European Journal of Political Economy, 20(2) 423-33.

Pesaran, M (2007) “A simple panel unit root test in the presence of cross-section
dependence.” Journal of Applied Economics. 22: 265–312.

Pesaran, M., Shin Y., Smith P.(1999), “Pooled Mean Group Estimation of Dynamic
Heterogeneous Panels”.Journal of the American Statistical Association, Vol. 94, No. 446, pp.
621-634.

Pigou, A.C., 1940. “The Political Economy of War”.MacMillan, London, UK.

Pinter, J (2014), «Pourquoi l'inflation réduit la dette »

www.bsi-economics.org/240-pourquoi-l’inflation-reduit-de-la-dette.

Procasky, W.J., Ujah, N.U. (2016). “Terrorism and its impact on the cost of debt”.Journal of
International Money and Finance, 60,253-266.

Qi, Yaxuan, Roth, Lukas,Wald, John K., (2009). “Political rights and the cost of
debt”.Journal of Financial Economics. 95 (2010), 202–226.

Shahbaz, M., Shabbir, M. S., Malik, M. N., Wolters, M. E. (2013).“An analysis of a causal
relationship between economic growth and terrorism in Pakistan”.Economic Modelling, 35 ,
21-29.
Wildasin, D. E. (2002).“Local Public Finance in the Aftermath of September 11”.
Journal of Urban Economics, 51(2), 225-237.