War and Peace in MENA: The Effects of International Trade and Finance

The relationship between peace and commercial/financial liberalization has historically been a hot subject of debate. Traditionally, ‘liberal’ approaches have argued that economic openness acts as a potent catalyst for peace. However, alternative perspectives, such as ‘realist’ approaches, have claimed that economic openness can potentially weaken countries’ national security. This debate underscores the need for empirical investigations beyond theoretical and intellectual musings. In this regard, data-based analyses can be useful for examining the relationship between economic globalization and military conflict. This article explores this complex relationship at the global level as well as for Middle East and North Africa (MENA). Our econometric analyses cover 142 countries over the 2009-2020 period. Our results confirm that ‘global’ trade liberalization is associated with a decline in the level of military conflicts in countries around the world. On the other hand, financial globalization increases overall conflict. The relationship between financial openness and conflict varies, depending on the sub-components of the conflict. When we focus on the MENA region, our results indicate that oil-importing MENA countries are more likely to benefit from trade globalization in terms of its conflict-reduction effects, while the same cannot be asserted for the oil-exporters. Our results also demonstrate that financial globalization exacerbates conflict levels in oil-exporting MENA countries, whereas it has a statistically insignificant impact in the oil-importers. We provide insights into the various ways in which ‘economic openness’ can either promote peace or generate instability and conflicts on a global and regional scale. As there is a complex association between economic globalization and peace, empirical exploration of this relationship, especially for ‘heated’ regions like MENA, can well pave the way for constructing a political-economy framework within which policy options can be identified reasonably and priorities can be determined rationally.