Preprint Article Version 1 NOT YET PEER-REVIEWED

The Impact of Terrorist Attacks on Foreign Exchange Rate: Case Study of Turkish Lira versus Pound Sterling

  1. Department of Economics, Faculty of Economics and Management, Czech University of Life Sciences, 165 00 Prague, Czech Republic
  2. Institute of economics studies, faculty of social science, Charles University, 116 36 Prague, Czech Republic
Version 1 : Received: 13 October 2016 / Approved: 14 October 2016 / Online: 14 October 2016 (10:30:30 CEST)

How to cite: Maitha, M.; Mustofa, J.; Gok, U. The Impact of Terrorist Attacks on Foreign Exchange Rate: Case Study of Turkish Lira versus Pound Sterling. Preprints 2016, 2016100053 (doi: 10.20944/preprints201610.0053.v1). Maitha, M.; Mustofa, J.; Gok, U. The Impact of Terrorist Attacks on Foreign Exchange Rate: Case Study of Turkish Lira versus Pound Sterling. Preprints 2016, 2016100053 (doi: 10.20944/preprints201610.0053.v1).

Abstract

In this study the impact of terrorist attacks on exchange rate is estimated. Particularly, the study focuses on Turkish terrorist attacks and its implication on Turkish lira versus pound sterling exchange rate. In order, to find the causal effect the study employed Autoregressive distributive lag (ARDL) bound testing approach as an estimation technique. Accordingly, the analysis reveals that terrorist attack has a negative impact on the exchange rate in both short and long-run. However, the negative effect of terrorism tends to be small in both the short-run and long-run. More precisely, terrorist attack depreciates the exchange rate between Turkish lira and pound sterling by approximately 0.00072 in the next trading day. The long-term effect also shows that terrorist attack depreciates the exchange rate on average by 0.00212.

Subject Areas

terrorism; exchange rate; ARDL; error correction

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