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The terrorism-finance nexus contingent on globalisation and governance dynamics in Africa

Author

Listed:
  • Simplice A. Asongu

    (Yaounde, Cameroon)

  • Tii N. Nchofoung

    (Ministry of Trade, Cameroon)

Abstract
This study empirically verifies the effect of terrorism on financial development and how globalisation and governance modulate the incidence of terrorism on financial development in Africa. Two terrorism indicators are adopted for this study, namely, the: number of terrorism incidences and number of terrorism deaths. The methodology involves the pooled data technique running from 1996-2018 for 34 African countries. The results from the POLS, Driscoll-Kraay and the Newey-West standard error corrections show that terrorism is detrimental to financial development. From the interactive regressions, three major tendencies are apparent. First, terrorism dynamics consistently have an unconditional negative effect on financial development. Second, the globalization and government dynamics modulate the terrorism dynamics to broadly induce a negative net effect on financial development. Third, policy thresholds at which the modulating variables reverse the net effect on financial development from negative to positive are: (i) 71.61572 trade (% of GDP) and 13.97872 FDI (% of GDP) for the incidence of terror and (ii) 1.16201 trade (% of GDP) for terror deaths. The computed thresholds make economic sense and worthwhile in terms of policy implications because they are within statistical range. The result is robust to alternative measures of terrorism and financial development. Policy implications are discussed.

Suggested Citation

  • Simplice A. Asongu & Tii N. Nchofoung, 2021. "The terrorism-finance nexus contingent on globalisation and governance dynamics in Africa," Research Africa Network Working Papers 21/016, Research Africa Network (RAN).
    • Handle: RePEc:abh:wpaper:21/016
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    References listed on IDEAS

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    Cited by:

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    2. Nchofoung, Tii N. & Achuo, Elvis Dze & Asongu, Simplice A., 2021. "Resource rents and inclusive human development in developing countries," Resources Policy, Elsevier, vol. 74(C).
    3. Guivis Zeufack Nkemgha & Tii N. Nchofoung & Fabien Sundjo, 2022. "Financial development and human capital thresholds for the infrastructure development-industrialization nexus in Africa," Working Papers of the African Governance and Development Institute. 22/091, African Governance and Development Institute..
    4. Jean-Claude Kouladoum, 2023. "Inclusive Education and Health Performance in Sub Saharan Africa," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 165(3), pages 879-900, February.

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    More about this item

    Keywords

    terrorism; financial development; globalisation; governance; Pooled data;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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