This chapter reviews the theoretical and empirical literature on the adverse macroeconomic consequences of terrorism. From a theoretical perspective, terrorism may discourage economic activity by adversely affecting capital accumulation and allocation as well as social trust and political institutions. A selective review of the empirical literature on the macroeconomic consequences of terrorism shows that terrorism is associated with reduced economic performance in studies that use sub-national, national and cross-national data. Estimated effects are usually modest but tend to be more severe in terrorism hotspots and in countries that are especially vulnerable to terrorism. A country’s resilience to terrorism’s negative economic effects is governed by a variety of factors, including a country’s economic size, its level of economic diversification and quality of market institutions. Finally, this chapter calls for further research to explore additional pathways through which terrorism affects economic performance and to identify factors influencing its impact heterogeneity, while also highlighting the importance of accounting for econometric pitfalls in such analyses to provide robust policy recommendations.

This chapter illustrates how economists have traditionally thought about decarbonisation. It notably provides an overview of the structure and key assumptions of Integrated Assessment Models, the main tool used by economists to model climate–economic interactions, with the aim of discussing their main policy lessons with regard to the macroeconomic implications of decarbonisation.