Speculation in international crises: report from the Gulf
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Speculation in international crises: report from the Gulf Robert J Weiner1,2 1 International Business Department, George Washington University, Washington, DC, USA; 2 GREEN (Group de Recherche en E´conomie de l’E´nergie et des Ressources Naturelles), De´partement d’e´conomique, Universite´ Laval, Que´bec, Canada
Correspondence: Professor RJ Weiner, International Business Department, George Washington University, 2023 G St NW, Washington, DC 20052, USA. Tel: þ 1 202 994 5981; Fax: þ 1 202 994 7422; E-mail: [email protected]
Abstract Recent years have seen recurring international financial crises, as well as a tremendous rise in trading and speculation. How are the two related? Are speculators and trading responsible for market volatility? This paper presents a study of the Gulf Crisis of 1990–1991, examining the behavior of the international oil market during a period of unprecedented volatility. The analysis suggests that a combination of political events and market fundamentals, rather than trading, was behind this volatility. Journal of International Business Studies (2005) 36, 576–587. doi:10.1057/palgrave.jibs.8400158 Keywords: oil shocks; speculators; volatility; market turmoil; financial crises
Introduction Globalization has been associated with a variety of controversies and discontents, but none so dramatic as the financial crises that have become a feature of the international landscape. Just as MNEs have received scrutiny for labor and environmental practices, so too have traders and speculators become targets of government officials and the antiglobalization movement for causing, or at least exacerbating, market turmoil in these crises. Buckley and Ghauri (2004, 81) suggest that globalization is one of the ‘big questions which arise from empirical developments in the world economy’ on which IB research should focus. The IB literature focuses on implications of globalization in two areas: (1) MNEs’ competitive strategies (recent examples include: Ghemawat, 2003; Buckley and Ghauri, 2004; Rugman and Verbeke, 2004); and (2) interactions between MNEs and nation-states (see, e.g., the papers collected in the Symposium on ‘Multinationals: The Janus Face of Globalization’, 2001).
Received: 7 August 2003 Revised: 4 October 2004 Accepted: 21 December 2004 Online publication date: 7 July 2005
In contrast, discussion of globalization of financial markets in the IB literature is sparse (e.g., Foerster and Karolyi, 1993; Ghemawat, 2003).1 The body of IB research that examines market turmoil in particular is surprisingly limited, despite the fact that economic and financial crises exemplify Buckley’s ‘key empirical factors in the global economy which need to be explained’ (Buckley, 2002, 370) that have motivated successful research in international business. The small literature focuses on the effects of volatility (e.g., Miller and Reuer, 1998; Glaum et al., 2000; Pantzalis et al., 2001).
Speculation in international crises
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