estimations, we treat the dependent variable, real GDP per capita and consumer price inflation as endogenous and the terrorism indicator and other control variables as exogenous. In military spending estimations, we treat the dependent variable, real GDP per capita and trade openness as endogenous and the terrorism indicator and other control variables as exogenous. To avoid a proliferation of instruments, we collapse the instrument set as suggested by Roodman (2009) . We validate the system GMM identification assumptions by applying a second-order serial correlation test
degree of political stability and the absence of violence/terrorism face low internal threats and should have lower military spending needs. The political stability/absence of violence/terrorism indicator is drawn from the World Governance Indicators (WGI) and measures perceptions of the likelihood of political instability and politically motivated violence, including terrorism. To control for the potentially non-linear relationship association between military spending and internal threats, we split this variable into 2—high (for observations above the sample mean for
case in this regard: following the attacks on the Bardo Museum and in Sousse, tourism receipts dropped by 3.5 percent of GDP in 2015, compared with 2014; and the sector remains under pressure in 2016. Figure 6. Measures of Political Stability and Private-Sector Confidence Sources: Top Left: FDI: IMF World Economic Outlook; Political Stability: World Bank World Goverance Indicators; IMF staff calulations. Top Right: Stockholm International Peace Research Institute Military Expenditure database; IMF staff calculations. Bottom Left: Business costs of terrorism
to the reporting obligation, general information about the reporting of suspicious obligation, money laundering and the financing of terrorism indicators, general statistics about the number of STRs received and their outcome, its cooperation with national and international agencies and other information relevant to the functions of the FIU in general. The report was distributed to all the regulated entities and persons and made public, in English, on the internet. It was also placed on the Egmont Secure Web. 344. Denmark’s FIU has been a member of the Egmont
economic activity. Challenging security conditions, including recent terrorist attacks in Afghanistan, Egypt, Pakistan, and Tunisia hamper confidence ( Figure 2.5 ) and hurt tourism ( Figure 2.2 ). Accommodating growing numbers of refugees (Jordan, Lebanon, Tunisia) adds to pressures on infrastructure, health, and education services. Figure 2.5. The High Business Cost of Terrorism (Indicator, 1–7; 7 being the highest cost) 1 Sources: World Economic Forum, The Global Competitiveness Report 2015–16; and IMF staff calculations. Note: Country abbreviations
growth. Measured by the World Bank Political Stability and Absence of Violence/Terrorism indicator, PICs score more favorably on political stability than other small states. This gives PICs, on average, an advantage of 0.3 percentage point in growth over other small states. It should be noted, however, that political stability varies substantially among PICs themselves. Other things being equal, the highest-scoring country in the region has a growth advantage of more than 1 percentage point over the lowest-scoring country. To sum up the results, PICs have relatively