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Military expenditure, terrorism and capital flight: Insights from Africa

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  • Asongu, Simplice
  • Amankwah-Amoah, Joseph

Abstract

In spite of the growing consensus of the need to utilise military expenditure to help combat terrorism, our understanding of the threshold at which military expenditure reduces the effect of terrorism stemming from capital flight remains largely underexplored. We employed a panel data of 37 African countries from 1996-2010 and determined that the thresholds are apparent exclusively in Quantile Regressions with military expenditure thresholds ranging from: 4.224 to 5.612 for domestic terrorism, 5.734 to 7.363 for unclear terrorism and 4.710 to 6.617 for total terrorism. No thresholds are apparent in transnational terrorism related regressions. Depending on the terrorist target, the findings broadly show that a critical mass of between 4.224 and 7.363 of military expenditure as a percentage of GDP is needed to reverse the effects of terrorism stemming from capital flight. Implications for public policy are discussed.

Suggested Citation

  • Asongu, Simplice & Amankwah-Amoah, Joseph, 2016. "Military expenditure, terrorism and capital flight: Insights from Africa," MPRA Paper 74230, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:74230
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    More about this item

    Keywords

    Capital flight; military expenditure; terrorism; Africa;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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