The effects of money laundering and terrorism on capital accumulation and consumption

Abstract

Purpose

The purpose of this paper is to study the impact of terrorist actions and money laundering on capital accumulation and consumption.

Design/methodology/approach

The paper builds a general equilibrium model that considers the existence of two representative agents: a terrorist and a worker. It departs from a formalization of Linn's findings about the connection between money laundering and terrorism. His results are confirmed and extended.

Findings

The paper shows that the combat to money laundering is an effective way of preventing terrorist actions. Besides it is found that these actions do not affect the optimal stock of capital goods but have a negative impact on per capita consumption.

Originality/value

The paper confirms Linn's findings concerning money laundering and terrorism by using a formal approach. It also extends the model in order to study the impact of money laundering and terrorism on capital accumulation and consumption.

Citation

Azevedo Araujo, R. (2006), "The effects of money laundering and terrorism on capital accumulation and consumption", Journal of Money Laundering Control, Vol. 9 No. 3, pp. 265-271. https://doi.org/10.1108/13685200610681788