The Impact of Political Stability on the Effectiveness of the Early Warning Systems in Predicting the Financial Crises: The Case of Jordan and Qatar

Baker Shnekat,Ghazi Al-Assaf

doi:10.5430/ijfr.v11n4p398

Baker Shnekat, Ghazi Al-Assaf

Open Access

https://doi.org/10.5430/ijfr.v11n4p398

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Abstract

The research aims to identify the impact of political stability in determining the effectiveness of early warning systems in predicting financial crises. The research applied a standard descriptive approach.In general, when comparing the two countries before including the model for economic variables the results showed that the nature of the impact of economic variables is different as the index of the financial crisis in Jordan is affected by the import of goods and services while the most influential indicators in the early warning model for the occurrence of the financial crisis in Qatar is the index of exporting goods and services on the basis that the system Qatari financial is very sensitive to the subject of export of gas and oil. Also, the results showed that there is a very significant impact of political stability on the financial crisis, which is greater than the impact of economic indicators, and if the two countries differed in which indicators for political stability have the greatest impact on the occurrence of the financial crisis, in Jordan the most influential indicator was the government effectiveness variable in Qatar, the regulatory quality index was the most influential.

Highlights

Over the last two decades, the world is exposed of many variables that lead to different type of financial crises
This research is an attempt to explain the impact of the effectiveness of early warning systems to anticipate financial crises in light of political stability in Jordan and Qatar
From the main empirical results, it is concluded that the political stability variable plays a significant role in explaining the effectiveness of the early warning system, for Jordan and Qatar

Summary

Introduction

Over the last two decades, the world is exposed of many variables that lead to different type of financial crises. Warning indicators play a fundamental role in effective crisis management, as the correct orientation for predicting crises before they occur leads to avoiding crises and avoiding the losses that may occur from financial crises. Early warning systems constitute play an important role in any country, it is considered as an essential tool that enables countries to face the changes, developments that occur in states. In addition to these systems constitute the basic line that different countries follow in order to avoid financial crises (Ari, 2012)

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