I take advantage of the annual variation in trade flows during foreign financial crises to find that measures of trade, rather than foreign interest rates, matter for income growth in small open economies. Small open economies were less severely affected by the global financial crisis of 2007-008 than major industrial nations; however, they experience 50% more conflict risk during non-crisis periods with every 1% decline in economic growth, as explained by the variation in foreign interest rates and trade flows. This research has important implications for small open economies that wish to maintain economic and political stability in the presence of exogenous shocks to trade.
The societal effects from terrorist attacks are well-known: the loss of life, destruction of property, and the inspiration of fear. However, can these effects be seen in the markets through stock price returns in different sectors of the economy? We examine a sample of 16 market indices in Turkey from May 2013 through August 2016 to assess market vulnerability to terrorist attacks. The severe terrorist attack in July 2015 and approximately 1 year after serve as the treatment for our difference-in-difference methodology. Our findings suggest that investors in Turkish markets looking to protect against the negative effects from terrorism should invest in the insurance, real estate, and the wood, paper, printing sectors as opposed to the transportation, chemical, petroleum, and plastic, and telecommunications sectors. Our results complement previous research into investment diversification strategies surrounding terrorist attacks.
This paper finds evidence of conflict’s short and long-run effects on GDP growth in a panel time-series framework. It reports growth regression results based on models from Sachs and Warner (1995) and Mankiw et al. (1992). We find that an episode of international conflict can cut long-term average annual growth rates by as much as 0.56% for each year the country is engaged in war. Conflict has particularly damaging effects in not only Africa, but Asia and Southeast Asian countries. The largest effects are seen in low and middle-income countries.
I consider the harmful effect of conflict on credit growth from 1960 to 2012 in 72 countries. I hypothesize one measure of growth, deviations from a HodrickPrescott trend, in the context of armed conflict to determine the extent to which credit markets are affected. Also, there will be a discussion of determinants of credit on a macro-scale and a measure of financial efficiency in terms of interest rate spread. I find that the effects of conflict are localized to regions that have relatively low-income levels, but that conflict cannot be considered a common effect throughout the region as a whole. Also, I have a short discussion of credit levels and battle deaths to conclude.
I set up a model of money-in-utility with two agents competing for a resource via gun expenditure. This model draws upon past research in contest success functions where agents invest in guns to “win” a contested resource through an all or nothing game. Through competition for an endowment resource, I derive unique expressions for money demand and inflation in partial equilibrium. The agent suffers inflationary pressure upon completion of conflict in which he/she loses the contest. The agent may also face deflationary pressure by investing in the military variable.