Ten Years Later: analysing the economic and financial impact of the 9/11 attacks on the U.S. economy

Abstract

The 9/11 attacks remain one of the most shocking terrorist attacks to have ever taken place and have left an indelible mark in the history of the world. This study examines the economic impact of these attacks on the U.S. economy. Towards this end, two distinct but complimentary methodologies are employed. First, a comparative study approach is adopted whereby key studies which put a cost to the attacks are examined and from these studies lower and upper bounds of different cost categories and of the total cost are established. Secondly, the short- to medium-term impact of the attacks on four key macroeconomic variables - real GDP growth, unemployment, consumer confidence and stock prices - is evaluated. This is done by simulating what values these variables are likely to have taken in the absence of the attacks through the use of autoregressive models, and then comparing these forecasts to the actual realizations. The U.S. economy is the world's largest and influences the global economy in substantial and important ways. Therefore, uncovering the economic impact of these attacks will give rise to interesting policy implications.