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The impact of Mena conflicts (the Arab spring) on global financial markets

Author

Listed:
  • Mohammad Mahdi Mousavi

    (The University of Edinburgh, UK)

  • Jamal Ouenniche

    (The University of Edinburgh, UK
    ESC Rennes, Rennes, France)

Abstract

It is believed that financial markets are integrated and sensitive to news – including political conflicts in some regions of the world. Furthermore, financial markets seem to react differently to information flows from one region to another. The purpose of this research is to discern the effects of the recent Middle East and North Africa (MENA) conflicts – commonly referred to as the Arab Spring – on the volatility of risks and returns of global and regional stock markets as well as Gold and Oil markets. To be more specific, we consider the main uprisings in Tunisia, Egypt, Libya and Yemen and their impact on financial markets – as measured by the volatility of their risks and returns. In sum, we cluster 53 stock markets into 6 regions; namely, developed, developing, MENA, Asia, Europe, and Latin America countries, and use T-GARCH to assess the reaction of these regions to each uprising event independently. In addition, we use GARCH-M to assess the reaction of these regions stock markets as well as Gold and Oil markets to the uprisings of MENA as a whole. Our empirical findings suggest that the uprising events of MENA have more impact on the volatility of risks and returns of developed, developing, and Europe regions than MENA itself. In addition, although the results show that the volatility of both risks and returns of both developed and MENA regions are significantly affected by general conflicts in MENA, the volatility of MENA is affected during all intervals and with higher significance level. Furthermore, while MENA uprisings as a whole impact on the volatility of risk of oil (after 5 days) and gold (immediately after entering news) significantly, the returns of these markets are not affected by conflicts.

Suggested Citation

  • Mohammad Mahdi Mousavi & Jamal Ouenniche, 2014. "The impact of Mena conflicts (the Arab spring) on global financial markets," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(4), pages 21-40, October-D.
  • Handle: RePEc:jda:journl:vol.48:year:2014:issue4:pp:21-40
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    Citations

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    Cited by:

    1. Mr. Philip Barrett & Sophia Chen & Miss Mali Chivakul & Ms. Deniz O Igan, 2021. "Pricing Protest: The Response of Financial Markets to Social Unrest," IMF Working Papers 2021/079, International Monetary Fund.
    2. Szczygielski, Jan Jakub & Charteris, Ailie & Obojska, Lidia, 2023. "Do commodity markets catch a cold from stock markets? Modelling uncertainty spillovers using Google search trends and wavelet coherence," International Review of Financial Analysis, Elsevier, vol. 87(C).
    3. Christian Espinosa-Méndez, 2022. "Civil unrest and firm performance: evidence from Chile," Economics and Business Letters, Oviedo University Press, vol. 11(3), pages 118-124.

    More about this item

    Keywords

    MENA conflicts; Arab Spring; Volatility; T-GARCH; GARCH-M;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other

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