Financial Market Integration in the Middle East: How Big is the Peace Dividend?
19 Pages Posted: 7 Nov 2012
Date Written: 2003
Abstract
Gains from capital and credit market integration are important sources of mutual benefits that have been neglected in the discussion of the economics of Middle East peace. Such integration entails smoother income and consumption as a result of international diversification of investments. We estimate the magnitude of the potential gains from sharing risk among the countries in the region, finding that they are of considerable magnitude, far exceeding the potential gain from sharing risk among OECD countries. The potential gains are high even for the small ‘peace club,’ Egypt, Israel, and Jordan. We find that, in practice, the bulk of the smoothing of country-specific output shocks for Middle Eastern countries has been achieved via saving (countries save less in bad years), and to some extent through international transfers. A considerable fraction of the shocks remains not smoothed, suggesting that the gains from further risk sharing through regional financial market integration are substantial.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Why is There a Home Bias? An Analysis of Foreign Portfolio Equity Ownership in Japan
By Jun-koo Kang and René M. Stulz
-
By Gur Huberman
-
Home Bias and the High Turnover
By Linda L. Tesar and Ingrid M. Werner
-
The Determinants of Cross-Border Equity Flows
By Richard Portes and Hélène Rey
-
Corporate Governance and the Home Bias
By Lee Pinkowitz, Rohan Williamson, ...
-
The Determinants of Cross-Border Equity Flows
By Richard Portes and Hélène Rey
-
The Portfolio Flows of International Investors, I
By Kenneth Froot, Paul G.j. O'connell, ...
-
The Information Content of International Portfolio Flows
By Kenneth Froot and Tarun Ramadorai
-
The Information Content of International Portfolio Flows
By Kenneth Froot and Tarun Ramadorai