In the last five years, thousands of businesses have closed in Mexico and thousands of Mexicans have moved away from the crime and violence brought on by the recent drug wars between cartels. Investment, growth, and development have also been negatively affected. Using a spatial model, this study found that growth in real per capita GDP for states in Mexico was positively related to growth in neighboring states of Mexico, negatively related to crime in surrounding states, and positively related to crime within the state in the previous year. Policy suggestions to promote state growth and development in Mexico include a national effort to resolve the drug war and the establishment of joint projects between states.

Terrorist attacks throughout the world have disrupted the flow of financial capital between nations and affected incomes, company profits and stock prices. This paper uses a GARCH(1,1) model to determine how these attacks have affected two specific stock markets: one in Pakistan and the other in Iran. It was found that significant, but different, stock index return shifts and changes in volatility occurred in the two markets. These effects on stock returns have important implications for the economies involved and provide information about investor reaction to terrorism.

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