In this paper we investigate the effects of terrorism on the financial markets. Evidence from six different financial markets shows that terror has a significant impact on both stock markets and the stock market volatility, and the magnitude of these effects are larger in emerging markets.

Dynamic models with parameters that are allowed to depend on the state of a hidden Markov chain have become a popular tool for modelling time series subject to changes in regime. An important question that arises in applications involving such models is how to determine the number of states...

This paper proposes a new procedure for analyzing volatility links between different markets based on a bivariate Markov switching model. An empirical application of this procedure to three emerging markets is examined and discussed.

Abstract Recent years have seen governments restricting civic freedoms and legislating significant increases in spending to combat terrorist activities. In this paper, we investigate the relationship between anti-terror spending and terrorism. In line with previous findings in the empirical...

This paper investigates the growth effects of three different types of tax policy innovations on short-term economic growth within a Markov-switching framework applied to the U.S. economy.

This paper investigates some finite-sample issues that arise in the analysis of Markovswitching autoregressive models with time-varying probabilities. An extensive simulation study is undertaken to examine the small-sample properties of the maximum likelihood estimator and related statistics,...

In this paper we examine the nature of currency crises. We ascertain whether the currency crises of the European Monetary System (EMS) were based either on fundamentals, or on self-fulfilling market expectations driven by extrinsic uncertainty. In particular, we extend previous work of Jeanne...