War and the World Economy

Gerald Schneider and Vera E. Troeger
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Gerald Schneider: Department of Politics and Management University of Konstanz, Germany
Vera E. Troeger: Department of Politics University of Exeter, United Kingdom

Journal of Conflict Resolution, 2006, vol. 50, issue 5, 623-645

Abstract: One of the perennial questions in the scientific study of war is how war affects the economy. The authors examine the influence that the political developments within three war regions had on global financial markets (CAC, Dow Jones, FTSE) from 1990 to 2000. They embed a rational expectation framework within commercial liberalism, a theoretical strand that tries to assess the interrelationship between war and economic exchanges. Time-series analyses account for the effects that the conflict between Israel and the Palestinians, the first confrontation of a U.S.-led alliance against Iraq, and the wars fought in Ex-Yugoslavia exerted. Using daily stock market data, the authors show that the conflicts affected the interactions at the core financial markets in the Western world negatively, if they had any systematic influence at all. They argue that these results lend some support to the rational expectations version of commercial liberalism.

Keywords: economy and war; commercial liberalism; financial markets; war rallies; E-GARCH and T-GARCH models; event data (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:jocore:v:50:y:2006:i:5:p:623-645

DOI: 10.1177/0022002706290430

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