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The Economic Impact of Terrorism in the Near East: Understanding the Threats Posed by Militant Groups

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Technical Report,01 Jun 2014,01 May 2015

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US Army Command and General Staff College Fort Leavenworth United States

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How successful are terrorist attacks in inflicting economic harm on states The small body of work that has explored this question finds that while domestic terrorism is generally ineffective, transnational terrorism does reduce economic growth in some regions. Despite being a major center of terrorism, the Near East region has not been empirically tested in this way. This paper investigates the effect of domestic and transnational terrorism on macroeconomic growth for the eighteen countries in the Near East from 1970-2012. The findings indicate that neither form of terrorism has significantly affected economic growth, however, internal conflicts and external wars have both greatly limited growth. These findings have implications for how states allocate their scarce resources to formulate efficient defense strategies. Terrorist groups are not monolithic in nature while some groups conduct terrorist attacks almost exclusively, others use terrorism as a part of a larger strategy that also incorporates guerilla warfare and sometimes even conventional military operations. More traditional terrorist groups, which often have universal or global objectives, can be effectively targeted using counterterrorism strategies. Groups that are more local in nature, and who use terrorism in conjunction with other tactics, present a much greater threat to a states economy and political stability. These groups are better targeted using a counterinsurgency framework, which focuses more resources towards resolving the underlying causes of the conflict.

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