When is Foreign Aid Effective in Fighting Terrorism? Threshold Evidence

International Economic Journal, 33(3), pp.370-389 (August 2017)

African Governance and Development Institute WP/15/031

23 Pages Posted: 18 Sep 2015 Last revised: 21 Aug 2017

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

John Ssozi

Baylor University

Date Written: September 16, 2015

Abstract

Building on previous literature, we assess when foreign aid is effective in fighting terrorism using quantile regressions on a panel of 78 developing countries for the period 1984-2008. Bilteral, multilateral and total aid indicators are used whereas terrorism includes: domestic, transnational, unclear and total terrorism dynamics. We consistently establish that foreign aid (bilateral, multilateral and total) is effective at fighting terrorism exclusively in countries where existing levels of transnational terrorism are highest. This finding is consistent with our theoretical underpinnings because donors have been documented to allocate more aid towards fighting transnational terrorist activities in recipient countries because they are more likely to target their interests. Moreover, the propensity of donor interest at stake is likely to increase with initial levels of transnational terrorism, such that the effect of foreign aid is most significant in recipient countries with the highest levels of transnational terrorism. Policy implications and future research directions are discussed.

Keywords: Foreign aid; Terrorism; Quantile regression

JEL Classification: C52; D74; F42; K42; O38

Suggested Citation

Asongu, Simplice and Ssozi, John, When is Foreign Aid Effective in Fighting Terrorism? Threshold Evidence (September 16, 2015). International Economic Journal, 33(3), pp.370-389 (August 2017); African Governance and Development Institute WP/15/031. Available at SSRN: https://ssrn.com/abstract=2661453 or http://dx.doi.org/10.2139/ssrn.2661453

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

John Ssozi

Baylor University ( email )

Waco, TX 76798
United States

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