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The effect of the war risk: a comparison of the consequences of the two Iraq wars on some financial variables

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Abstract

This paper measures the effect of war on some financial variables using the heteroskedasticity based estimation technique proposed by Rigobon and Sack (2005). The importance of applying this technique is due to the possibility of capturing the effect of a variable, which is here the risk of war, that is not measurable. This work compares the effect of the Iraq war of 1991 with the Iraq war of 2003 on different variables in Italy and US. According to the results, we find that the two wars caused different effects on the analysed variables.

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  • Elena Corallo, 2005. "The effect of the war risk: a comparison of the consequences of the two Iraq wars on some financial variables," LIUC Papers in Economics 171, Cattaneo University (LIUC).
    • Handle: RePEc:liu:liucec:171
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    1. Kenneth West & Ka-fu Wong & Stanislav Anatolyev, 2009. "Instrumental Variables Estimation of Heteroskedastic Linear Models Using All Lags of Instruments," Econometric Reviews, Taylor & Francis Journals, vol. 28(5), pages 441-467.
    2. Rigobon, Roberto & Sack, Brian, 2005. "The effects of war risk on US financial markets," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1769-1789, July.
    3. Roberto Rigobón & Kristin Forbes, 2001. "Contagion in Latin America: Definitions, Measurement, and Policy Implications," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 1-46, January.
    4. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction of Monetary Policy to the Stock Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 639-669.
    5. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1553-1575, November.
    6. Martin D. D. Evans & Richard K. Lyons, 2017. "How is Macro News Transmitted to Exchange Rates?," World Scientific Book Chapters, in: Studies in Foreign Exchange Economics, chapter 14, pages 547-596, World Scientific Publishing Co. Pte. Ltd..
    7. Roberto Rigobon & Brian Sack, 2003. "Spillovers Across U.S. Financial Markets," NBER Working Papers 9640, National Bureau of Economic Research, Inc.
    8. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
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