Trade and Thy Neighbor’s War

December 1, 2009

Preview Citation

Format: Chicago

Mahvash S Qureshi. Trade and Thy Neighbor’s War, (USA: International Monetary Fund, 2009) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the spatial dispersion effects of regional conflicts, defined as internal or external armed conflicts in contiguous states, on international trade. Our empirical findings-based on different measures of conflict constructed using alternate definitions of contiguity and conflict-reveal a significant collateral damage in terms of foregone trade as a result of spillovers from conflict in neighboring countries. The magnitude of this negative externality is somewhat larger for international conflicts than intrastate warfare, but about one-third of conflict in the host economies. Further, the impact is persistent-on average, it takes bilateral trade three years to recover from the end of intrastate conflicts in neighboring states, and five years from international conflicts. These findings are robust to alternate definitions of conflict, estimation methods, and specifications, and underscore the importance of taking into account spillover effects when estimating the economic costs of warfare.

Subject: Estimation techniques, Gravity models, Personal income, Plurilateral trade, Trade balance

Keywords: Civil war, Dummy variable, Low income, WP

Publication Details

Pages:

51
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/283
Stock No:

WPIEA2009283
ISBN:

9781451874280
ISSN:

1018-5941

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