Financial Stress Dynamics in MENA Region : Evidence from the Arab Spring

We analyse the impact of instability caused by Arab Spring on co-movements and volatility spillovers of aggregated Financial Stress Indices for eight MENA countries. Using a dynamic frequency connectedness framework, we find that stress transmission between markets is higher at low frequencies than at high frequencies, which implies that MENA markets are slow in adjusting the information they receive. The Global Financial crisis generated a stronger spillovers effect between MENA markets than political turmoil of the Arab Spring. These results are useful for investors with different investment horizons, and have policy implication for maintenance of financial stability in this region