The Role of Expectations: Effects of Terrorist Campaigns Versus Isolated Terrorist Attacks on Economic Growth in South East Asia

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Dela Cruz, Jan Aldrich Larsen Dela Paz
Terrorism; South East Asia; Expectations; GTD; Global Terrorism Database; Crowding out; Isolated Terrorism; Terrorist Campaigns
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This paper examines the effects of terrorism on economic growth by looking at two types of terrorism: Isolated terrorist attacks and Terrorist group attacks. Analysis is focused on the developing countries in Southeast Asia from 1970 to 2010, using data from the Global Terrorism Database (GTD) that aggregates all domestic and transnational terrorist attacks in the world. Using random effects regression on an unbalanced panel data, results show significant negative impacts of terrorist campaigns and a significant positive impact of isolated terrorist attacks within five years. Increased government spending is determined to be a significant part of the growth reduction, especially for isolated attacks, which could be a factor that crowds out investment. The role of investment in this study did not produce significant results, but consistently produced negative results, which follows the crowding out theory.