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10.1080/10242690903105414 Defence and Peace Economics 1024-2694 (print)/1476-8267 (online) Original Article 2009 Taylor & Francis 000 29 MehmetYaya Using a time series method called ‘transfer function’, this paper examines the effect of terrorism on tourism in Turkey. The results indicate that there exists a negative but small impact of terrorism, which is observed within approximately one year. However, terrorist attacks in Turkey have accounted for a reduction of six million foreign tourists over the last nine years. Moreover, the economic cost of terrorism in the tourism industry was more than $700 million in 2006. However, terrorist attacks in continental Europe and America, and an active war involving a neighboring country, had no effects on tourism in Turkey.