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

Muhammad Shahbaz and Shahbaz Shabbir ()
Authors registered in the RePEc Author Service: Muhammad Shahbaz

MPRA Paper from University Library of Munich, Germany

Abstract: 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.

Keywords: Inflation; Terrorism; Cointegration (search for similar items in EconPapers)
JEL-codes: B22 (search for similar items in EconPapers)
Date: 2011-04-28, Revised 2011-05-29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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