The role of inclusive development and military expenditure in modulating the effect of terrorism on governance

Purpose The purpose of this paper is to investigate the role of inclusive human development and military expenditure in modulating the effect of terrorism on governance. Design/methodology/approach It is based on 53 African countries for the period 1998-2012 and interactive generalised method of moments is employed. Six governance indicators from the World Bank and two terrorism variables are used, namely, domestic and transnational terrorism dynamics. Findings The following main findings are established. There is a negative net effect on governance (regulation quality and corruption-control) when inclusive human development is used to reduce terrorism. There is a positive net impact on governance (voice and accountability and rule of law) when military expenditure is used to reduce domestic terrorism. Originality/value The authors have complemented the sparse literature on the use of policy variables to mitigate the effect of policy syndromes on macroeconomic outcomes.