How Did 9/11 Affect The Economy

The effects of 9/11 on the US economy can be broadly divided into two categories: the short run economic effects the long-term effect on government policy and various industries. The first of these two categories was immensely impacted by the attacks and the widespread repercussions for economic activity, market confidence, and unemployment. The effects in the long-term, however, were not nearly as profound. As shown by the fairly rapid recovery after the attacks. Furthermore, a large portion of what was assumed to be the economic fallout from 9/11 was, in fact, already in motion before the attacks occurred.
Although this may seem to minimize the economic impact of the 9/11 terror attacks, the severe consequences in the last quarter of 2001
The Federal Reserve immediately issued a statement to reassure banks and the country as a whole that “ample liquidity would be available” in an effort to boost market confidence. There was also a large scale purchasing of government securities in the open market, a significant reduction of the federal funds rate, and $100 billion injected into the US economy per day for the three days after 9/11. Since the effects of most monetary policy is delayed 6 to 8 months, these immediate actions paved the way for a quick recovery when employed in tandem with fiscal policy changes. Namely, the government instituted an expansionary fiscal policy including an $40 billion increase in federal expenditure, unemployment benefit extensions, and corporate investment incentives. Although these actions were not in response to the attacks, they lessened the impact of shock on the US economy. In fact, the first quarter of 2002 saw a rapid bounce back of aggregate demand and market confidence. In essence these actions dramatically shortened the recovery period for the stock market, everyday consumers, and the entire
Specifically, the airline, travel, and insurance industries were still undergoing a slow recovery in the last quarter of 2004. The attacks most drastically affected the airlines that, in four days, lost $1.8 billion. This also created a forty percent drop in demand for short flights, a thirty percent drop in unemployment, 39 airline companies declaring bankruptcy, and increased regulations that permanently lowered the profit margins for flights. In travel, international spending rose 83% around the world but only 13% in the US. Additionally, the USTA estimated 68 million lost visitors, $606 billion in lost spending, and 467,000 lost jobs. Finally, The insurance industry faced upwards of $40 billion in insured claims, most of which were still being litigated years later. These three industries, hardest hit by the attacks, are among an isolated group that still felt the economic aftermath of the attacks beyond