The Cross-Border Impact of Political Violence

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

Peace Economics, Peace Science, and Public Policy, 2015, vol. 21, issue 2, 239-272

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.

Keywords: event study; violent events; terrorism; political violence (search for similar items in EconPapers)
JEL-codes: F20 F36 F41 F43 G11 G14 G15 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/peps-2014-0046

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