Executive Briefings

Terrorist Attacks, Like Those in Paris, Said Not to Have Lasting Negative Impact on Economy

For some people, even to discuss the impact on an economy, let alone financial markets, of a tragedy such as the Paris attacks is poor taste. But one of the aims of terrorists is to cause economic and financial damage; hence the attacks on Wall Street on 9/11 or on tourists in Tunisia earlier this year. So the issue is worth considering.

Despite some dire predictions at the weekend, financial markets have been remarkably sanguine in the face of this latest tragedy; at the time of writing, both the London and Frankfurt markets are up on the day. In this, investors may be learning from past experience. The events of 9/11 - an atrocity on a vastly greater scale than anything that preceded it - may have reduced GDP growth in the US that year by half a percentage point; the stock market (which was closed for a few days) recovered all its losses within a month. In July 2005, when suicide bombers attacked the London transport network, the UK market recovered within days; British GDP rose 0.8 percent that quarter.

The attacks may cause a short-term disruption to economic life; people may decide not to visit town centres for a few days. But this generally means they postpone their consumption rather than abandon it; economic activity is simply shifted from one period to the next.

Read Full Article

Despite some dire predictions at the weekend, financial markets have been remarkably sanguine in the face of this latest tragedy; at the time of writing, both the London and Frankfurt markets are up on the day. In this, investors may be learning from past experience. The events of 9/11 - an atrocity on a vastly greater scale than anything that preceded it - may have reduced GDP growth in the US that year by half a percentage point; the stock market (which was closed for a few days) recovered all its losses within a month. In July 2005, when suicide bombers attacked the London transport network, the UK market recovered within days; British GDP rose 0.8 percent that quarter.

The attacks may cause a short-term disruption to economic life; people may decide not to visit town centres for a few days. But this generally means they postpone their consumption rather than abandon it; economic activity is simply shifted from one period to the next.

Read Full Article