This article briefly presents two main stances on terrorism’s impact on an economy. It provides arguments for the government’s active counterterrorism policy by presenting consequences of neglecting to respond. Consequently, authorities have to prepare a strategy which may be based on prevention or punishment-deterrence actions. The three phases of response, prevention, recovery and military operations, incur costs which are difficult to asses. Boosted public spending may be financed by expenditure switching, marginally balanced budgets or government borrowing. Nonetheless, all these methods impose threats on fiscal consolidation and evoke crowding out, spin-off and resource mobilization effects on the entire economy.
|Journal||Working Papers in Management, Finance and Economics|
|Publication status||Published - 2007|