Terrorism as instrumental variable

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Perhaps my econometrics is a bit rusty, but I found this summary of new research on Vox kind of odd:

There is both casual and formal evidence from the post-war period that abrupt movements in the price of oil have significant effects on the macroeconomy...However, the price of oil and the state of the world economy are endogenously determined and the links and interactions between the two are far from simple. The authors of DP 6937 experiment with terrorist acts as the instrumental variable, in order to examine the relationship between the price of oil, terrorist incidents and the resultant effects on profitability and margins.

How is it that terrorist acts are exogenous to the functioning of an economy? This book might suggest otherwise.


Ryan Hahn

Operations Officer

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