The Relationship Between Budget Deficit and Terrorism: Evidence from Turkey

According to Global Terrorism Index of 2017, Turkey is ranked as the ninth in the group of countries most affected by the terrorist activities. Indeed, the effect on various macroeconomic variables of terrorism in Turkey has been the subject to many studies. In this study, the effect of terrorism on the budget deficit will be discussed. In this context, relationship between the numbers of terrorist incidents and budget deficit in the period of 1984-2016 were tested by using Granger Causality Test and Cointegration Analysis. As a result of the study, it has been shown that there is cointegration between terrorism and budget deficit. Also there is a unidirectional causality relationship from terrorism to budget deficit. In this context, it can be said that the increasing terrorist incidents affects the budget deficit by increasing defense spending. Key Words: Budget Deficit, Terrorism, Time Series Analysis.