The Impact of Terrorism on Financial Markets
IMF Working Papers, March 1, 2005
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Bibliographic details
- Authors: Oana M Croitoru, R. B. Johnston
- Published: March 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451860795.001
Summary
- The paper examines how financial markets reacted to recent terrorist attacks and how authorities responded.
- Well-functioning financial markets, supported by prompt and effective actions by relevant authorities, were generally efficient in absorbing shocks from terrorist attacks.
- The paper discusses market and regulatory responses to terrorist attacks and identifies elements to strengthen to further enhance financial market resilience to terrorism.
Market responses and findings
- Financial markets reacted to terrorist attacks with observable shocks that markets and participants absorbed.
- Market efficiency in absorbing shocks was bolstered by prompt and effective reactions from relevant authorities.
- The analysis focuses on interactions among firms, governments, and market participants in the context of market volatility after attacks.
Regulatory and policy responses
- The paper reviews regulatory responses to terrorist attacks and the role of authorities in stabilizing markets.
- Emphasis is placed on the need for regulatory elements to be strengthened to enhance market resilience to terrorism.
- Subject areas explicitly covered include Anti-money laundering and combating the financing of terrorism (AML/CFT), Banking, Money laundering, Terrorism, and Terrorism financing.
Recommendations and areas for strengthening
- Strengthen the elements of market structure and regulation that underpin resilience to terrorist shocks (specific elements are discussed in the paper).
- Ensure prompt and effective responses from relevant authorities to support market functioning during and after terrorist incidents.