Trade Isolation Effect of Terrorism Risks along the “Belt and Road” Route

Zhang Xiaolei (张晓磊)

and Zhang Erzhen (张二震)

School of International Economics and Trade, Nanjing University of Finance and Economics, Nanjing, China 2 School of Economics, Nanjing University
Abstract: Rising terrorism risks are a major obstacle for Belt and Road countries to
integrate into the global trade network. Based on the cross-country panel data of the now
66 Belt and Road countries during 2000-2013, this paper carries out an empirical study on
the trade isolation effect of terrorism risks with the following findings: Rising terrorism risks
will indeed give rise to a significant “trade isolation effect” with greater negative impact
on a country’s export than on import. After taking into account the endogeneity of the
variable of terrorism risks and heterogeneous casualties of terrorist attacks, this conclusion
remains robust. In addition, the trade isolation effect of terrorism risks is also characterized
by heterogeneous targets under attack, i.e. the degree of trade isolation effect is positively
correlated with the randomness of targets under terrorist attacks.
Keywords: terrorism risks, Belt and Road Initiative, trade isolation effect, trade
dependence
JEL Classification: D74, F02, F13

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