This study aims to use interactive quantile regressions to assess the conditional role of foreign aid in reducing the potentially negative effect of terrorism on fuel exports in 78 developing countries for the period of 1984-2008.
Bilateral and multilateral aid indicators have been used, whereas terrorism includes domestic, transnational, unclear and total terrorism dynamics. Interactive quantile regressions have been used.
First, with the exception of unclear terrorism, bilateral aid can be used to mitigate the potentially negative effects of terrorism on fuel exports in bottom quantiles of the fuel export distribution. Second, multilateral aid can be used to reduce the negative effect of transnational terrorism on fuel exports exclusively in the highest (90th) quantile of fuel exports. The corresponding modifying thresholds are within policy ranges disclosed in the summary statistics.
While the policy instrument of bilateral aid is most relevant in countries with below-median fuel exports, the policy instrument of multilateral aid is effective with respect to transnational terrorism in countries with the highest levels of fuel exports.
This study contributes to the literature on the role of external flows in reducing the negative externalities of terrorism on development outcomes.
