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The Cross-Border Impact of Political Violence

Author

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  • Al-Ississ Mohamad

    (Department of Economics, American University in Cairo, AUC Avenue, P.O. Box 74, New Cairo 11835, Egypt)

Abstract

This paper documents the reallocation of financial and economic resources after political violence to other countries. It analyzes the impact of 66 political violence events that took place in 32 countries on 57 stock exchanges over a period of 20 years. Using the event study methodology, this paper is the first to document a positive financial impact from political violence in other countries. The results show that in globally integrated markets, the substitution of financial and economic activities away from afflicted countries magnifies their losses. On average over a 20 day window, event countries suffered a 2.9% drop in stock valuation while other countries picked a windfall of 0.8%. Additionally, the paper investigates the geographic, economic, and risk determinants of this cross-border flow of capital.

Suggested Citation

  • Al-Ississ Mohamad, 2015. "The Cross-Border Impact of Political Violence," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 21(2), pages 239-272, April.
    • Handle: RePEc:bpj:pepspp:v:21:y:2015:i:2:p:239-272:n:3
    DOI: 10.1515/peps-2014-0046
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    References listed on IDEAS

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    More about this item

    Keywords

    event study; violent events; terrorism; political violence;
    All these keywords.

    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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