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Macroeconomic consequences of terrorism in Pakistan

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  • Malik, Zahra
  • Zaman, Khalid

Abstract

The objective of the study examines the macroeconomic consequences of terrorism in Pakistan. The study evaluates the short- and long-run relationship between terrorism and economic factors over a period of 1975–2011. Both objectives have been achieved with the sophisticated econometrics techniques including cointegration theory, Granger causality test and variance decomposition, etc. The result reveals that macroeconomic factors, i.e., population growth, price level, poverty and political instability cause the terrorism incidence in Pakistan. However, income inequality, unemployment and trade openness have no long-run relationship with the terrorism incidence in Pakistan. The study may conclude that, for some how, Pakistan's macroeconomic indicators have significant long-run equilibrium with terrorism incidence. The result of Granger causality indicates that except unemployment, all other macroeconomic indicators have unidirectional causality with terrorism incidence. Unemployment has a bi-directional causality with the terrorism incidence in Pakistan. The results of variance decomposition indicate that there exists statistically significant cointegration among macroeconomic factors and terrorism incidence in Pakistan. Among macroeconomic factors, changes in price level exert the largest influence on terrorism in Pakistan. Contrary, the influence of poverty seems relatively the least contribution level for changes in terrorism incidence in Pakistan.

Suggested Citation

  • Malik, Zahra & Zaman, Khalid, 2013. "Macroeconomic consequences of terrorism in Pakistan," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 1103-1123.
    • Handle: RePEc:eee:jpolmo:v:35:y:2013:i:6:p:1103-1123
    DOI: 10.1016/j.jpolmod.2013.08.002
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    Cited by:

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    2. Syed Hasanat Shah & Hafsa Hasnat & Mohsin Hasnain Ahmad, 2016. "The Effects of the Human Cost of Terror on National Income, Private Consumption and Investment in Pakistan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(2), pages 216-235, September.
    3. Syed Ali Raza & Muhammad Shahbaz & Sudharshan Reddy Paramati, 2017. "Dynamics of Military Expenditure and Income Inequality in Pakistan," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 131(3), pages 1035-1055, April.
    4. Mubashra, Sana & Shafi, Mariuam i, 2018. "The Impact of Counter-terrorism Effectiveness on Economic Growth of Pakistan: An Econometric Analysis," MPRA Paper 84847, University Library of Munich, Germany.
    5. Haider, Murtaza & Anwar, Amar, 2014. "Impact of terrorism on FDI flows to Pakistan," MPRA Paper 57165, University Library of Munich, Germany.
    6. Abbas, Syed Ali & Syed, Shabib Haider, 2021. "Sectarian terrorism in Pakistan: Causes, impact and remedies," Journal of Policy Modeling, Elsevier, vol. 43(2), pages 350-361.
    7. Muhammad Nasir & Muhammad Shahbaz, 2015. "War on terror: Do military measures matter? Empirical analysis of post 9/11 period in Pakistan," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(5), pages 1969-1984, September.
    8. Bisharat Hussain Chang & Khalil Ahmed Channa & Emmanuel Uche & Osamah Ibrahim Khalaf & Osamah Waheed Ali, 2022. "Analyzing the impacts of terrorism on innovation activity: A cross country empirical study," Advances in Decision Sciences, Asia University, Taiwan, vol. 26(Special), pages 124-161, December.
    9. Abbasi, Kashif & Jiao, Zhilun & Khan, Arman & Shahbaz, Muhammad, 2020. "Asymmetric impact of renewable and non-renewable energy on economic growth in Pakistan: New evidence from a nonlinear analysis," MPRA Paper 101854, University Library of Munich, Germany, revised 13 Jul 2020.
    10. Sidra Feroz & Bushra Yasmin, 2021. "Terrorism and Brain Drain in Pakistan: Is There a Connection?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 22(1), pages 73-87, March.
    11. Ghulam Akhmat & Khalid Zaman & Tan Shukui & Faiza Sajjad, 2014. "Exploring the root causes of terrorism in South Asia: everybody should be concerned," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(6), pages 3065-3079, November.
    12. Mustafa Mete, 2016. "The Effects of Terrorist Activities on Development in the Southeastern Region of Turkey-Theoretical and Empirical Application," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 229-245, April.
    13. Rizvi, Syed Muhammad All-e-Raza & Véganzonès-Varoudakis, Marie-Ange, 2023. "Institutional determinants of internal conflicts in fragile developing countries," Journal of Policy Modeling, Elsevier, vol. 45(5), pages 910-934.
    14. Izhar Hussain Shah & Hung‐Suck Park, 2021. "Chronological change of resource metabolism and decarbonization patterns in Pakistan: Perspectives from a typical developing country," Journal of Industrial Ecology, Yale University, vol. 25(1), pages 144-161, February.
    15. Yeeles, Adam & Akporiaye, Alero, 2016. "Risk and resilience in the Nigerian oil sector: The economic effects of pipeline sabotage and theft," Energy Policy, Elsevier, vol. 88(C), pages 187-196.
    16. Khan, Murad & Ahmed, Tanvir, 2019. "Terrorism, military operations and farmer’s income in Waziristan (Pakistan)," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 623-635.
    17. Raza, Syed Ali & Shah, Nida & Khan, Waqas Ahmed, 2017. "Do Workers’ Remittances Increase Terrorism? Evidence from South Asian Countries," MPRA Paper 86745, University Library of Munich, Germany, revised 2017.
    18. Mengmeng Hao & Jingying Fu & Dong Jiang & Fangyu Ding & Shuai Chen, 2020. "Simulating the Linkages Between Economy and Armed Conflict in India With a Long Short‐Term Memory Algorithm," Risk Analysis, John Wiley & Sons, vol. 40(6), pages 1139-1150, June.

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    More about this item

    Keywords

    Terrorism; Inflation; Poverty; Cointegration; Pakistan;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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