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Terrorism and the macroeconomy: Evidence from Pakistan

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  • Sultan Mehmood

Abstract

Pakistan with highest number of terrorism related deaths of any country over the past decade, the number exceeding the total terrorism related deaths for both the European and North American continents, provides an ideal laboratory to study impact of terrorism on the macroeconomy. Quasi-Structural VAR, Vector Error Correction Model, Impulse Response Functions and Granger-Causality tests on a sample that covers over 4500 terrorist incidents and consequent 10, 200 deaths [from 1973 to 2010] are employed to study the relationship between terrorism and the macroeconomy. One of the major advantages of the current methodology is that it not only enables one to circumvent the heterogeneity biases inherent in cross-country studies but it also allows distinguishing between short and long-run effects. It is documented that cumulatively terrorism has cost Pakistan around 33.02% of its real national income i.e. terrorism costs Pakistan around 1% of real GDP per capita growth every year.

Suggested Citation

  • Sultan Mehmood, 2014. "Terrorism and the macroeconomy: Evidence from Pakistan," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(5), pages 509-534, October.
  • Handle: RePEc:taf:defpea:v:25:y:2014:i:5:p:509-534
    DOI: 10.1080/10242694.2013.793529
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    Cited by:

    1. Randall K. Filer & Dragana Stanišić, 2016. "The Effect of Terrorist Incidents on Capital Flows," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 502-513, May.
    2. Haider, Murtaza & Anwar, Amar, 2014. "Impact of terrorism on FDI flows to Pakistan," MPRA Paper 57165, University Library of Munich, Germany.
    3. Hina, Hafsa, 2017. "Household Consumption Behavior in Pakistan under the Shadow of Personal Insecurity," MPRA Paper 77410, University Library of Munich, Germany.
    4. Amar Iqbal Anwar & Mazhar Yasin Mughal, 2013. "Foreign Financial Flows and Terrorism In Developing Countries," Working Papers hal-01885149, HAL.
    5. 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.
    6. Fırat Bilgel & Burhan Can Karahasan, 2016. "Thirty Years of Conflict and Economic Growth in Turkey: A Synthetic Control Approach," LEQS – LSE 'Europe in Question' Discussion Paper Series 112, European Institute, LSE.
    7. Mazhar Yasin Mughal & Amar Iqbal Anwar, 2015. "Do migrant remittances react to bouts of terrorism?," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(6), pages 567-582, December.
    8. repec:spr:qualqt:v:51:y:2017:i:3:d:10.1007_s11135-016-0336-z is not listed on IDEAS
    9. Serfraz, Ayesha, 2017. "What is the effect of foreign direct investment inflows on economic growth in Pakistan? An empirical analysis in the light of religious sectarianism as catalyst for terrorism," Discussion Papers 59, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    10. Kechagia, Polyxeni & Metaxas, Theodore, 2017. "FDI and Terrorism in the developing Asian countries: A panel data analysis," MPRA Paper 80945, University Library of Munich, Germany.
    11. Chuku Chuku & Isip Ima-Abasi & Abang Dominic, 2017. "Working Paper 284 - Growth and Fiscal Consequences of Terrorism in Nigeria," Working Paper Series 2410, African Development Bank.
    12. 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.

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E0 - Macroeconomics and Monetary Economics - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • H1 - Public Economics - - Structure and Scope of Government
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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