Abstract
The causal relationship between remittances and terrorism is very controversial. Yet, the question still not genuinely addressed by existing empirical studies. This paper endeavors to undertake this issue. We test the short run relationship between remittances and terrorism using a Panel VAR model and exploring data from Global Terrorism Database on a sample of 108 developed and developing countries over the period 1970-2014. Granger causality test and Cholesky decomposition are used in order to isolate the shocks and compute the orthogonalized response of remittances and terrorism incidents. Our results show that while each of the two variables of interest does not cause the other, remittance causes terrorism in sub-Saharan Africa. This corroborates with the assumption that remittance contributes to fund terrorist attacks in this region. Again, terrorism Granger causes remittance in MENA region and in Central America.
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