Money from Afar: Analyzing the link between remittances and terrorism

Despite widespread rhetoric portraying remittances and international money transfers as convenient channels for financing terrorism, leading to a range of financial regulations targeting such flows, empirical evidence linking remittances to terrorism remains limited and inconclusive. This study investigates the causal relationship between remittances and terrorism using a global panel dataset spanning 1970 to 2019. To isolate causality, the analysis exploits exogenous variation in remittances driven by natural disasters in related countries; the relatedness being defined by the share of migrants. The results reveal a robust positive relationship between remittances and terrorism, consistent across multiple specifications, alternative outcome variables, and alternative instruments. These findings offer new insight into the complex role of remittances in terrorism dynamics. Additional robustness checks, including instrument recentering and falsification tests, further reinforce the validity of the results and the credibility of the identification strategy.