Economic Risk Linkages Between Israel and Middle East Countries

Abstract

This study analyses the economic risk relationship between seven of the top economies in the Middle East and Israel. Our findings are of great interest and likely to begin a new debate in the Middle East region. The results of a Block Exogeneity Walt test reveal that economic stability in Israel does Granger-cause economic stability in Lebanon, Oman, Qatar and the UAE. Reverse causality has been validated for Lebanon and Bahrain only. We also find that there is a positive impact on Israel’s economic stability over the stability of Bahrain, Kuwait and the UAE with different seasonal patterns. In the reverse direction, in response to a shock to Israel’s economic stability, the stability of the UAE, Saudi Arabia, Oman, and Kuwait are also found to be positive and significant with different seasonal frequencies.

Key wods: Israel, Middle East, Economic Risk, Block Exogeneity-Wald Test, Generalized Impulse Response Function. 
JEL: C32, F32.

Povezivanje ekonomskih rizika između Izraela i zemalja Bliskog istoka

U radu se analizira odnos ekonomskog rizika između sedam vodećih ekonomija na Bliskom Istoku i Izraelu. Naši nalazi su od velikog interesa i verovatno će započeti novu debatu na području Bliskog Istoka. Rezultati egzogenog Block Wald testa pokazuju da ekonomska stabilnost u Izraelu uzrokuje u Granger-ovom smislu ekonomsku stabilnost u Libanu, Omanu, Qataru i UAE. Povratna uzročnost je validirana samo za Libanon i Bahrein. Takođe smo zaključili da postoji pozitivan uticaj ekonomske stabilnosti Izraela na stabilnost Bahreina, Kuwaita i UAE sa različitim sezonskim obrascima. U suprotnom smeru, kao odgovor na šok na ekonomsku stabilnost Izraela, stabilnost UAE, Saudijske Arabije, Omana i Kuwaita takođe se smatra pozitivnim i značajnim sa različitim sezonskim frekvencijama.

Ključne reči: Izrael, Bliski Istok, ekonomski rizik, egzogeni Block Wald test, generalizovana funkcija impulsnog odziva.