ارزش دارایی ها و چشم انداز صلح پایداری
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|14610||2010||11 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : The Quarterly Review of Economics and Finance, Volume 50, Issue 2, May 2010, Pages 146–156
Continuous violent conflict is a central cause of economic stagnation in many of the world's poorest countries. Given that attempts to achieve peace in these countries often remain elusive, it is important to identify mechanisms which reveal the sustainability of peace over time. We argue that long-term financial asset values reflect the sustainability of peace prospects because the expectation of continued peace will result in higher long-term asset prices. Equity index prices from Sri Lanka are used to test this theory. Also considered are the accuracy of equity prices versus other predictors of sustainable peace, including exchange rates and survey responses. The main conclusion is that long-term financial asset prices indicate the likelihood of conflict or peace and can inform policies as they relate to conflict-torn areas.
Internal violence is a central cause of continued economic stagnation in many of the world's poorest countries. As Collier (2007, p. 18) notes, many of these countries “are stuck in a pattern of violent internal challenges to government,” which “…can trap a country in poverty.” Understanding the causes of this conflict trap and potential solutions is a central policy issue. In many cases attempts to achieve sustained peace have remained elusive. Consider, for instance, the attempts to negotiate peace in Rwanda, Sierra Leone, Sri Lanka, Somalia, and Angola in the 1990s. In each case the inability to get the relevant parties to commit to peace resulted in the onset and escalation of conflict. When peace is unsustainable, the costs are significant, as illustrated by the case of Rwanda where over 800,000 people died following the collapse of a negotiated peace agreement. In cases of long-term conflict, obtaining initial peace is a necessary, but not sufficient, condition for breaking free of the conflict trap. Also important is ensuring that peace is sustainable, meaning that it will persist over time. Determining the sustainability of peace prospects is important for citizens who, as Rwanda illustrates, often incur the costs of conflict. Gauging the sustainability of peace is also important for an array of international actors (e.g., international organizations, governments, non-government organizations, etc.) because decisions have to be made regarding the type and level of resources (e.g., monetary and humanitarian aid, negotiators, troops and peacekeepers, etc.) invested in conflict-torn areas. Given this, a central issue is the identification of mechanisms which reveal the sustainability of peace. It is our contention that long-term asset prices reflect the expectation of sustained peace or continued conflict. In the case of an ongoing conflict, asset prices may reflect different influences, including the prospects, or changes in the prospects, of one side or the other winning the conflict outright, or the likelihood of parties involved in conflict delivering on commitments to peace.1 Given this, our central thesis is that long-term financial asset prices accurately reflect the confidence of investors in the stability of institutions and can therefore be used as an indicator of the perceived sustainability of peace. If peace is not sustainable, meaning that conflict will continue in the future, investors will change their expectations regarding institutional stability leading to a fall in long-term asset prices. Similarly, if peace prospects are viewed as sustainable, indicating continued peace and institutional stability, this will result in an increase in long-term asset prices. Since long-term financial asset prices can be used to predict the sustainability of peace, they can play an important role in informing policies toward conflict-torn areas. Our contribution is twofold. First, we build on an existing literature which establishes asset prices as indicators of expectations. To date, this literature has mainly used financial asset prices to interpret and understand historical events. We extend this reasoning to ongoing conflicts and, in so doing, provide a specific, forward-looking mechanism that can be used to gauge the sustainability of peace over time. By establishing a link between economic variables and the sustainability of peace, we identify a tool that can be utilized to inform policy decisions. For example, this knowledge could allow governments and international agencies to reallocate resources (e.g., troops, humanitarian aid, etc.) if peace is expected to be unsustainable. Second, we provide insight into which indicator best predicts the sustainability of peace by analyzing and comparing long-term asset prices, exchange rates, and survey responses. In order to test our general thesis regarding the effectiveness of long-term financial assets as indicators of the sustainability of peace, we analyze the long-running and, until recently, seemingly intractable conflict in Sri Lanka.2 Sri Lanka provides an interesting test case for our hypothesis given that it has been characterized by ongoing conflict for several decades. Further, the government and rebel parties have entered into numerous peace agreements only to have them unravel in a relatively short period of time, meaning that peace was unsustainable. Given this, Sri Lanka provides a natural experiment to test our general thesis. Our thesis indicates that where peace prospects are not sustainable, long-term asset markets should respond with lower values. Similarly, where peace is sustainable, long-term asset markets should respond with higher values. In the case of Sri Lanka, we analyze asset values prior to the breakdown of peace to see if this is indeed the case. Our analysis indicates that the asset price variable captures the prospect that conflict would end soon and that the government would not lose. Within the context of the Sri Lankan conflict we also consider the accuracy of long-term financial assets versus alternative indicators such as exchange rates and survey data. We conclude that long-term financial assets are better indicators of the sustainability of peace as compared to other alternatives. Intuitively, this finding makes sense. Surveys can suffer from issues of accuracy and objectivity and are often lagging indicators of the persistence of peace. Short-term financial assets can suffer from sensitivity to short-term factors. Stock markets overcome these problems and therefore provide the best indication of the sustainability of peace. Our analysis proceeds as follows. The next section provides an overview of the literature that establishes the use of economic variables as indicators of expectations. Section 3 discusses the empirical strategy for testing our thesis. Section 4 consists of an overview of the Sri Lankan conflict, as well as our empirical results. Section 5 provides an analysis of our results in the historical context of conflict in Sri Lanka. The section also considers the effectiveness of long-term financial assets relative to other potential indicators of the sustainability of peace, such as short-term exchange rates and survey responses. Section 6 concludes with the implications of our analysis.
نتیجه گیری انگلیسی
Our analysis has important implications for efforts to assist countries in breaking free of the conflict trap. Understanding and formulating an effective policy toward conflict-torn areas requires finding mechanisms that reveal expectations regarding sustainable peace. Our analysis indicates that long-term financial assets are one such mechanism. These assets provide a forward-looking, single index which reflects expectations regarding the sustainability of peace. Policymakers can use these assets to inform policy decisions regarding the allocation of resources. For example, where long-term assets indicate that peace is not sustainable, policymakers may consider allocating resources to prevent or minimize the ensuing conflict. Although our empirical analysis focused on Sri Lanka, the implications of our study can be extended to all cases of conflict and efforts to achieve some form of sustainable peace in conflict-torn areas. Our analysis indicated that long-term financial asset prices are accurate indicators of the sustainability of peace. However, when indicators of long-term assets are unavailable, other indicators (short-term assets, surveys, etc.) can be employed. While not necessarily as reliable as long-term, fixed assets, these alternatives can provide some insight into the sustainability of peace.