Abstract
Political instabilities and violent political conflict have in recent years risen substantially throughout the world. Especially in the Middle East and North Africa they have grown to decisive factors permanently challenging the livelihoods of millions. We assess whether and to what extent varying intensities of conflict impact economic activity in Palestine which has been subject to substantial violent political conflict for decades. In particular, we analyse the relationship between various intensity levels of political instability measured by conflict-caused fatalities and uncertainty of weekly food prices in the West Bank between 2004 and 2011 using a GARCH model. We consider four food commodities covering vegetables, fruits and animal products. Banana and milk prices are found not to show clustered volatility while onion and pear prices do. The impact of varying conflict intensities on weekly average prices appears to be modest. This might suggest that effects happen on a temporally and geographically more disaggregated scale.
Highlights
The long-lasting political conflict between Israel and the Palestinians has been of large importance both for politics and the economies in the Middle East (Shosan and Grootens, 2010)
Trade and marketing are subject to considerably more challenges during phases of increased conflict intensity, we aim at obtaining evidence on the questions whether the levels and volatility of food prices are affected by the waves of violence which have been recurring for decades, whether there was a discernible dividend for relatively more peaceful periods yielding calmer prices and how much the magnitude of this difference was
We present unique evidence on whether and by how much the varying intensity of the political conflict translated into measurable uncertainty in food markets of the West Bank
Summary
The long-lasting political conflict between Israel and the Palestinians has been of large importance both for politics and the economies in the Middle East (Shosan and Grootens, 2010). Examples are the West Bank Barrier erected in order to prevent the infiltration of armed Palestinians into Israel or temporary and permanent check points and road blocks which inhibit or prevent the movement of people and goods within the West Bank. These measures heavily affect the Palestinian civilian population in the West Bank and Gaza (Akkaya et al, 2008) which has, in consequence, to deal with a number of factors substantially challenging their individual economic livelihoods which creates despair and sustained destabilization. Trade and marketing are subject to considerably more challenges during phases of increased conflict intensity, we aim at obtaining evidence on the questions whether the levels and volatility of food prices are affected by the waves of violence which have been recurring for decades, whether there was a discernible dividend for relatively more peaceful periods yielding calmer prices and how much the magnitude of this difference was
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