The Economic Impact of Terrorism: A New Model and Its Application to Pakistan.

Abstract

This paper introduces a new economic model to analyze the effects of a possible terrorist attack, namely the terrorist attack vulnerability evaluation model (TAVE-Model). The model analyzes three different phases of terrorism: (i) origins of a terrorist attack; (ii) terrorist attack itself; and (iii) post-attack effects. In addition, the TAVE-Model identifies economic desgrowth (−δ), intensity of terrorist activities (αi), terrorist attack losses (−π), economic wear (Π), level of terrorist attack tension (ζ), level of terrorist attacks monitoring (η), and total economic leaking (Ωt) under a terrorist attack. Finally, we apply the TAVE-Model to Pakistan, a country where terrorism poses a significant socio-economic risk. More specifically, we use the model to assess the relationship between terrorism and the economic performance of Pakistan.

Note: © 2015 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.

Keywords: Terrorism; Economic modeling; Economic desgrowth; Policy modeling; Pakistan

JEL Classification: R11; R12