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Economies 2017, 5(1), 5; doi:10.3390/economies5010005

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, Prague, Kamýcká 129, 165 00 Praha 6, Czech Republic
2
Institute of Economics Studies, Faculty of Social Science, Charles University, Prague, Opletalova 26, 110 01 Praha 1, Czech Republic
*
Author to whom correspondence should be addressed.
Academic Editor: Ralf Fendel
Received: 13 October 2016 / Revised: 6 January 2017 / Accepted: 19 January 2017 / Published: 28 January 2017
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Abstract

In this study, the impact of terrorist attacks on exchange rate is estimated. Particularly, the study focuses on terrorist attacks in Turkey 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 a terrorist attack has a negative impact on the exchange rate in both the short-run and long-run. However, the negative effect of terrorism tends to be small in both the short-run and long-run. More precisely, terrorist attacks depreciate the exchange rate between Turkish lira and pound sterling by approximately 0.024% in the next trading day. The long-term effect also shows that a terrorist attack depreciates the exchange rate on average by 0.0706%. View Full-Text
Keywords: terrorism; exchange rate; ARDL; error correction; JEL Classification: B23, D74, F31 terrorism; exchange rate; ARDL; error correction; JEL Classification: B23, D74, F31
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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MDPI and ACS Style

Maitah, M.; Mustofa, J.; Ugur, G. The Impact of Terrorist Attacks on Foreign Exchange Rate: Case Study of Turkish Lira versus Pound Sterling. Economies 2017, 5, 5.

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