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Relationship Between FDI, Terrorism and Economic Growth in Pakistan: Pre and Post 9/11 Analysis

Author

Listed:
  • Syed Jawad Hussain Shahzad

    (COMSATS Institute of Information Technology)

  • Muhammad Zakaria

    (COMSATS Institute of Information Technology)

  • Mobeen Ur Rehman

    (COMSATS Institute of Information Technology)

  • Tanveer Ahmed

    (COMSATS Institute of Information Technology)

  • Bashir Ahmed Fida

    (Modern College of Business and Sciences)

Abstract

The study examines cointegration and causal relationship between FDI, terrorism and economic growth in Pakistan using quarterly frequencies for the period 1988–2010. For empirical analysis data is divided into two sub-periods i.e. pre 9/11 (1988–2001) and post 9/11 (2002–2010) periods. The results show that long run cointegration holds between FDI, terrorism and economic growth. Granger causality results indicate that there is bidirectional short and long run causality between economic growth and FDI for both sub-samples. These findings are supported by variance decomposition and impulse response analysis. The findings suggest applicability of modernization theory to explain FDI and economic growth relationship. The results also reveal that terrorism has a deteriorating impact on FDI.

Suggested Citation

  • Syed Jawad Hussain Shahzad & Muhammad Zakaria & Mobeen Ur Rehman & Tanveer Ahmed & Bashir Ahmed Fida, 2016. "Relationship Between FDI, Terrorism and Economic Growth in Pakistan: Pre and Post 9/11 Analysis," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 127(1), pages 179-194, May.
    • Handle: RePEc:spr:soinre:v:127:y:2016:i:1:d:10.1007_s11205-015-0950-5
    DOI: 10.1007/s11205-015-0950-5
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    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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