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Is hike in inflation responsible for rise in terrorism in Pakistan?

  • Shahbaz, Muhammad
  • Shabbir, Shahbaz Muhammad

This paper investigates the static and dynamic effect of inflation and economic growth on terrorism using annual frequency i.e. 1971-2010 in case of Pakistan. In doing so, ARDL bounds testing approach to cointegration has been applied while robustness of long run relationship is confirmed by using rolling window approach. The empirical evidence confirms cointegration between inflation, economic growth and terrorism in Pakistan. An increase in inflation raises terrorist attacks. Economic growth is also a major contributor to terrorism. Moreover, bidirectional causality is found between inflation and terrorism as investigated by VECM Granger-causality approach while variance decomposition also supports the findings by VECM analysis.

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File URL: http://mpra.ub.uni-muenchen.de/31236/1/MPRA_paper_31236.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31236.

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Date of creation: 28 Apr 2011
Date of revision: 29 May 2011
Handle: RePEc:pra:mprapa:31236
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