War and Peace in MENA: The Effects of International Trade and Finance

The relationship between economic and financial globalization and peace has been a subject of speculation and disagreement. Classical conceptions proposed that openness may act as a potent catalyst for peace. However, alternative perspectives have questioned this perspective by claiming that free trade can potentially weaken countries' national security. This debate underscores the need for empirical investigations beyond theoretical conjecture, providing a data-driven examination of the relationship between trade and financial globalization, and military conflict. This paper tries to explore the complex relationship between economic and financial integration and geopolitical conflicts, by focusing on the MENA region. Our analysis covers 142 countries over the period 2009-2020. Our results confirm that global trade liberalization is linked with a decline in the level of military conflicts in countries around the world. On the other hand, financial globalization increases overall conflict. The relationship between financial openness and conflict also varies depending on the sub-components of conflict When we focus on the MENA region, our results indicate that oil-importing MENA countries are more likely to benefit from trade globalization while trade partnership is not an effective factor in preventing military conflict in oil-exporters. Our results also show that financial globalization exacerbates conflict levels in oil-exporter MENA countries while it has insignificant impact on oil-importers. We hope to provide insights into the various ways in which trade and financial integration can either promote peace or create instability on a global scale. As there seems to be a complex relationship between peace on the one hand, and trade and financial openness on the other, exploring this relationship, especially for the “heated” regions like the MENA can well pave the way for constructing a political-economy framework within which policy options and priorities can be identified rationally and reasonably.