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Asset values and the sustainability of peace prospects

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  • Coyne, Christopher J.
  • Dempster, Gregory M.
  • Isaacs, Justin P.

Abstract

Continuous violent conflict is a central cause of economic stagnation in many of the world's poorest countries. Given that attempts to achieve peace in these countries often remain elusive, it is important to identify mechanisms which reveal the sustainability of peace over time. We argue that long-term financial asset values reflect the sustainability of peace prospects because the expectation of continued peace will result in higher long-term asset prices. Equity index prices from Sri Lanka are used to test this theory. Also considered are the accuracy of equity prices versus other predictors of sustainable peace, including exchange rates and survey responses. The main conclusion is that long-term financial asset prices indicate the likelihood of conflict or peace and can inform policies as they relate to conflict-torn areas.

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Bibliographic Info

Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 50 (2010)
Issue (Month): 2 (May)
Pages: 146-156

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Handle: RePEc:eee:quaeco:v:50:y:2010:i:2:p:146-156

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Web page: http://www.elsevier.com/locate/inca/620167

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Keywords: Capital markets Sustainable peace Sri Lanka;

References

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  1. Wells, John & Wills, Douglas, 2000. "Revolution, Restoration, and Debt Repudiation: The Jacobite Threat to England's Institutions and Economic Growth," The Journal of Economic History, Cambridge University Press, vol. 60(02), pages 418-441, June.
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  8. Wells, John & Wills, Dougals, 2000. "Revolution, Restoration, and Debt Repudiation: The Jacobite Threat to England's Institutions and Economic Growth," The Journal of Economic History, Cambridge University Press, vol. 60(02), pages 418-441, June.
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Cited by:
  1. Yiping Huang & Jian Chang & Prema-Chandra Athukorala & Sisira Jayasuriya, 2013. "Economic Policy Shifts in Sri Lanka: The Post-Conflict Development Challenge," Asian Economic Papers, MIT Press, vol. 12(2), pages 1-28, June.
  2. Timothy Besley & Hannes Mueller, 2012. "Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland," American Economic Review, American Economic Association, vol. 102(2), pages 810-33, April.
  3. Eli Berman & Joseph Felter & Ethan Kapstein & Erin Troland, 2013. "Predation, Taxation, Investment and Violence: Evidence from the Philippines," NBER Working Papers 19266, National Bureau of Economic Research, Inc.

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