The Impact of Terrorist Attacks on Foreign Exchange Rate: Case Study of Turkish Lira versus Pound Sterling

Mansoor Maitah (), Jehar Mustofa and Gok Ugur
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Jehar Mustofa: Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences, Prague, Kamýcká 129, 165 00 Praha 6, Czech Republic
Gok Ugur: Institute of Economics Studies, Faculty of Social Science, Charles University, Prague, Opletalova 26, 110 01 Praha 1, Czech Republic

Economies, 2017, vol. 5, issue 1, 1-8

Abstract: In this study, the impact of terrorist attacks on exchange rate is estimated. Particularly, the study focuses on terrorist attacks in Turkey and its implication on Turkish lira versus pound sterling exchange rate. In order to find the causal effect, the study employed Autoregressive distributive lag (ARDL) bound testing approach as an estimation technique. Accordingly, the analysis reveals that a terrorist attack has a negative impact on the exchange rate in both the short-run and long-run. However, the negative effect of terrorism tends to be small in both the short-run and long-run. More precisely, terrorist attacks depreciate the exchange rate between Turkish lira and pound sterling by approximately 0.024% in the next trading day. The long-term effect also shows that a terrorist attack depreciates the exchange rate on average by 0.0706%.

Keywords: terrorism; exchange rate; ARDL; error correction; JEL Classification: B23, D74, F31 (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:5:y:2017:i:1:p:5-:d:88996

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