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

Author

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  • Mansoor Maitah

    (Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences, Prague, Kamýcká 129, 165 00 Praha 6, Czech Republic)

  • 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)

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%.

Suggested Citation

  • Mansoor Maitah & Jehar Mustofa & Gok Ugur, 2017. "The Impact of Terrorist Attacks on Foreign Exchange Rate: Case Study of Turkish Lira versus Pound Sterling," Economies, MDPI, vol. 5(1), pages 1-8, January.
    • Handle: RePEc:gam:jecomi:v:5:y:2017:i:1:p:5-:d:88996
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    Cited by:

    1. Park, Jin Suk & Newaz, Mohammad Khaleq, 2018. "Do terrorist attacks harm financial markets? A meta-analysis of event studies and the determinants of adverse impact," Global Finance Journal, Elsevier, vol. 37(C), pages 227-247.
    2. Stelios Markoulis, 2021. "Do Terror Attacks Affect the Euro? Evidence from the 21st Century," JRFM, MDPI, vol. 14(8), pages 1-24, July.
    3. Sylvie Kobzev Kotásková & Petr Procházka & Luboš Smutka & Mansoor Maitah & Elena Kuzmenko & Markéta Kopecká & Vladimír Hönig, 2018. "The Impact of Education on Economic Growth: The Case of India," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 66(1), pages 253-262.
    4. Usman Akbar & Akash Kumar & Hameed Khan & Muhammad Asif Khan & Khansa Parvaiz & Judit Oláh, 2020. "Trade-Offs in Competitive Transport Operations," Economies, MDPI, vol. 8(3), pages 1-19, July.

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    More about this item

    Keywords

    terrorism; exchange rate; ARDL; error correction; JEL Classification: B23; D74; F31;
    All these keywords.

    JEL classification:

    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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