Trade and Thy Neighbor's War

52 Pages Posted: 5 Jan 2010

See all articles by Mahvash Saeed Qureshi

Mahvash Saeed Qureshi

International Monetary Fund (IMF) - Research Department

Date Written: December 2009

Abstract

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.

Keywords: Economic models, International trade, Political economy, Regional shocks

Suggested Citation

Qureshi, Mahvash Saeed, Trade and Thy Neighbor's War (December 2009). IMF Working Paper No. 09/283, Available at SSRN: https://ssrn.com/abstract=1531516

Mahvash Saeed Qureshi (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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