Asset Market Perspectives on the Israeli-Palestinian Conflict

15/02/2006 |  Zussman Asaf, Orregaard Nielsen Morten
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Finacial Markets and Financial Stability
Asset Market Perspectives on the Israeli-Palestinian Conflict
Asaf Zussman, Noam Zussman and Morten Orregaard Nielsen
Abstract
The Israeli-Palestinian conflict has played a salient role in world affairs in recent decades. This paper locates turning points in the conflict since the late 1980s using asset market data from Israel and Palestinian Authority (PA). We find that major escalations in violence, such as the outbreak of the Intifada in 2000, lead to significant declines in asset prices in both Israel and the PA. Conversely, major peace initiatives, such as the Oslo accords in 1993 and the Road Map plan in 2003, lead to substantial increases in asset prices on both sides of the conflict. An additional novel finding is that asset markets respond positively to the success of politicians who favor a negotiated settlement to the conflict.
JEL classification codes: G14, H56
Keywords: Foreign Exchange Market, Israeli-Palestinian Conflict, Stock Market, Structural Breaks, Turning Points
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