Terrorist Financing and Money Laundering

Terrorism  causes  enormous  costs  to  society.  Since  the  9/11  attacks,  the  “war  on  terror”  has  therefore  been  an  important  challenge  to  all  civilized  countries.  In  the  present  contribution  we  analyze the root causes and costs of terrorist activity, thereby setting the stage for discussing the  need for measures against terrorist financing. We argue that running a terrorist organization requires  substantial financial resources which are transferred to the groups through clandestine and often  illegal channels. Anti-money laundering policies may appear useful measures to stop transfers to  terrorist groups; however, they are not sufficient means to deal with all facets of terrorist financing.  Compared  to  similar  activities  of  organized  crime,  terrorist  financing  involves  “reverse”  money  laundering. This is a consequence of some fundamental differences between terrorism and organized  crime, which also lead to different implications in terms of choosing appropriate counter-measures.terrorist financing, causes and costs of terrorism, money laundering, organized  crime vs. terrorism, anti-terrorist financing policies

What causes terrorism?

Popular beliefs link terrorism to economic, political and social under- development. In this contribution, we comprehensively review the related, most relevant cross-country analyses to ascertain the true determinants of terrorism. The related theoretical underpinnings are presented and com- mon analytical and methodological objections are discussed. In general, we nd that terrorism is closely linked to political instability, sharp divides within the populace, country size and further demographic, institutional and international factors. Sound counter-terrorism policies should work on these prominent root causes of terrorism. Evidence is only marginal that economic performance, structural economic conditions, democrati- zation, education or religious aliation signicantly interact with terror- ism. Thus, we are skeptical towards popular policy advice that focuses on poverty alleviation, a promotion of economic development, democratiza- tion, education or the like.Determinants of Terrorism, Political Violence, Counter-Terrorism Policies

Terrorism in the Worlds of Welfare Capitalism

This contribution investigates the link between welfare policies and domestic terrorism for 15 Western European countries during 1984-2003. We argue that welfare policies improve national socio-economic conditions and thus increase the opportunity costs of terrorism. We investigate whether spending in certain policy fields translates into a reduction of terrorism, and whether certain worlds of welfare capitalism [Esping-Andersen (1990)] are more resistant to the threat of domestic terrorism. We find strong support that higher spending in certain policy fields is associated with a signficant reduction in domestic terrorist activity. Only moderate evidence indicates that the di¤erent worlds of welfare capitalism are differently prepared to deal with domestic terrorism. Spending - or the mere existence of a social system - seems to be more strongly associated with a reduction in domestic terrorism than the actual welfare systems' institutional design. Our findings are robust to a variety of specifications.Domestic Terrorism, Social Policy, Welfare Regimes, Worlds of Welfare Capitalism, Western Europe, Paradox of Redistribution, Beveridge vs. Bismarck

The Economics of Terrorism and Counter-Terrorism: A Survey (Part I)

This survey provides an in-depth analysis of existing research on the economic analysis of terrorism and counter-terrorist measures. First the existing evidence on the causes of terrorism is analyzed, then we consider the evidence of the consequences of terrorism and we demonstrate why it is important to regarding of the issue of counter-terrorism policy. Moreover the survey presents the existing knowledge on the interrelation between the economy and the issue of security and it incorporates analysis the level of knowledge about the causal chains between security and the economy. Also it focuses on perspective and methodologies from the discipline of economics but also refers to research from related disciplines (sociology, political science). It also assembles the knowledge on the impact of terrorism on the economy as reflected in macro-economic variables and its impact on specific sectors. Furthermore it assesses how potential an actual terrorist event determine consumer and producer behaviour, public policy, as well as terrorist responses to these policies. Finally a European perspective on the terrorism security annexes is discussed and here we analyze the causes of terrorism in Europe.risk, insecurity, survey, terrorism, counter-terrorism, security economics

Financial Deepening, Trade Openness and Economic Growth in Latin America and the Caribbean

This contribution investigates the direct and indirect causal interactions between financial deepening, trade openness and economic growth for 13 Latin American and Caribbean countries. Using a rather general approach to identify indicators for financial deepening and to detect Granger causality within a VAR/VECM framework, we find almost no evidence for the popular hypothesis of finance-led growth. Evidence of bidirectional finance-growth causality is stronger but mostly unstable in the long run. Most results indicate a demand-following or insignificant relationship between finance and growth in Latin America. This finding seems to be consistent with regard to the weakness and deficiencies of the region's financial systems. Further, there is no evidence that finance indirectly and unilaterally induces growth via the channel of trade openness. Thus, policies that prioritize financial and trade liberalization cannot be supported by this study. Instead, a holistic policy approach seems to be preferable that promotes the determinants of both real sector growth and financial development. As a result, financial factors may positively and significantly contribute to economic development in the region.Financial Markets, Economic Growth, Openness, Hsiao’s Granger Causality, Latin America and Caribbean

The Economics of Terrorism and Counter-Terrorism: A Survey (Part I)

This survey provides an in-depth analysis of existing research on the economic analysis of terrorism and counter-terrorist measures. First the existing evidence on the causes of terrorism is analyzed, then we consider the evidence of the consequences of terrorism and we demonstrate why it is important to regarding of the issue of counter-terrorism policy. Moreover the survey presents the existing knowledge on the interrelation between the economy and the issue of security and it incorporates analysis the level of knowledge about the causal chains between security and the economy. Also it focuses on perspective and methodologies from the discipline of economics but also refers to research from related disciplines (sociology, political science). It also assembles the knowledge on the impact of terrorism on the economy as reflected in macro-economic variables and its impact on specific sectors. Furthermore it assesses how potential an actual terrorist event determine consumer and producer behaviour, public policy, as well as terrorist responses to these policies. Finally a European perspective on the terrorism security annexes is discussed and here we analyze the causes of terrorism in Europe.risk, insecurity, survey, terrorism, counter-terrorism, security economics

Causal Linkages Between Domestic Terrorism and Economic Growth

We use the Hsiao-Granger method to test for growth-terrorism causality for seven Western European countries. In bivariate settings, the impact of economic performance on domestic terrorism is very strong. In trivariate settings, the impact of performance on terrorism diminishes. Here, we find that economic performance leads terrorist violence in robust ways only for three out of seven countries. Terrorism is almost never found to causally influence growth in bivariate and trivariate specifications. Our findings indicate that (i) the role of economic performance in determining terrorist violence appears to have been important for some countries and (ii) all attacked economies have been successful in adjusting to the threat of terrorism.Domestic Terrorism, Growth, Hsiao-Granger Causality, Western Europe

Great Expectations and Hard Times — The (Nontrivial) Impact of Education on Domestic Terrorism

This contribution investigates the role of education in domestic terrorism for 133 countries between 1984 and 2007. The findings point at a nontrivial effect of education on terrorism. Lower education (primary education) tends to promote terrorism in a cluster of countries where the socioeconomic, political and demographic conditions are unfavorable, while higher education (university education) reduces terrorism in a cluster of countries where conditions are more favorable. This suggests that country-specific circumstances mediate the effect of education on the (opportunity) costs and benefits of terrorism. For instance, the prevalence of poor structural conditions in combination with advances in education may explain past and present waves of terrorism and political instability in the Middle East. The results of this study imply that promoting education needs to be accompanied by sound structural change so that it can positively interact with (individual and social) development, thereby reducing terrorism.terrorism, education, negative binomial regression, revolution, conflict resolution

The Origins of Terrorism: Cross-Country Estimates on Socio-economic Determinants of Terrorism

As a prerequisite of an appropriate anti-terror strategy, it is indispensable to assess the underlying causes of terror. We examine social and economic conditions in the country of origin of terrorist attacks, claiming that low opportunity costs of terror, e.g., approximated by slow growth and poor institutions raise the likelihood of terror and the willingness in the population to support terror. Using a negative binomial regression model, we are able to show that unfortunate socio-economic conditions in a country are likely to reduce the opportunity costs of potential terrorists and increase the number of terrorist attacks originating from a specific country. Interestingly, this effect is particularly relevant after a certain level of development has been reached. We therefore distinguish between several broad country groups, namely the OECD, Europe and Islamic countries.terror attacks, openness, discrete choice analysis, institutions

The Economics of Terrorism and Counter-Terrorism: A Survey (Part I)

This survey provides an in-depth analysis of existing research on the economic analysis of terrorism and counter-terrorist measures. First the existing evidence on the causes of terrorism is analyzed, then we consider the evidence of the consequences of terrorism and we demonstrate why it is important to regarding of the issue of counter-terrorism policy. Moreover the survey presents the existing knowledge on the interrelation between the economy and the issue of security and it incorporates analysis the level of knowledge about the causal chains between security and the economy. Also it focuses on perspective and methodologies from the discipline of economics but also refers to research from related disciplines (sociology, political science). It also assembles the knowledge on the impact of terrorism on the economy as reflected in macro-economic variables and its impact on specific sectors. Furthermore it assesses how potential an actual terrorist event determine consumer and producer behaviour, public policy, as well as terrorist responses to these policies. Finally a European perspective on the terrorism security annexes is discussed and here we analyze the causes of terrorism in Europe.