The Effects of Terrorism Risk on Household Savings

MRIC Working Papers, No. 37, 2020

47 Pages Posted: 9 Jun 2020

See all articles by Sophie-Madeleine Roth

Sophie-Madeleine Roth

Ludwig-Maximilians-Universität München

Annette Hofmann

St. John's University - Peter J. Tobin College of Business

Johannes Gerd Jaspersen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management)

Date Written: March 16, 2020

Abstract

In view of the increasing intensity of terrorism worldwide, behavioral changes of households become visible. People tend to overvalue terror-related risks such that the subjective probability of terrorism events. Using microeconomic panel data of the elderly population from 13 European countries, this study analyzes the impact of terrorism risk on household savings patterns. Terrorism increases household savings to a significant and economically meaningful degree. Two terror variables – the number of attacks and the number of fatalities – analyze this effect in detail. While the impact of the number of attacks is negative, savings increase with the number of fatalities. We give a potential explanation for this difference. While the results for European countries are consistent, Israel is markedly different from the rest of the sample – an effect likely due to the different political situations in both regions. The reported findings have implications for both fiscal and monetary policy.

Keywords: Terrorism, Terrorism risk, Risk perception, Household savings, Treatment effect

JEL Classification: D14, D91, F52, G11, G51, H56

Suggested Citation

Roth, Sophie-Madeleine and Hofmann, Annette and Jaspersen, Johannes Gerd, The Effects of Terrorism Risk on Household Savings (March 16, 2020). MRIC Working Papers, No. 37, 2020, Available at SSRN: https://ssrn.com/abstract=3595982 or http://dx.doi.org/10.2139/ssrn.3595982

Sophie-Madeleine Roth (Contact Author)

Ludwig-Maximilians-Universität München ( email )

Annette Hofmann

St. John's University - Peter J. Tobin College of Business ( email )

New York, NY
United States

Johannes Gerd Jaspersen

Ludwig Maximilian University of Munich (LMU) - Faculty of Business Administration (Munich School of Management) ( email )

Schackstr. 4
Munich, DE 80539
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
114
Abstract Views
541
Rank
360,632
PlumX Metrics