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

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.Inflation, Terrorism, Cointegration

Renewable and nonrenewable energy consumption, real GDP and CO2 emissions nexus: a structural VAR approach in Pakistan

Any rise in real GDP crafts higher energy demand in Pakistan. This short-term rising energy requirement is fulfilled with the help of nonrenewable and renewable energy consumption, but nonrenewable energy consumption adds more in it. The rise in nonrenewable energy consumption lifts real GDP up in short-run. Forecast error variance decomposition illustrates nonrenewable energy consumption alone passes 87% variation in the CO2 emissions. This verifies fossil fuels are accountable for environmental degradation in Pakistan. The CO2 emissions worsen economic activity, real GDP falls but renewable energy consumption augments. This elevation in renewable energy consumption is the proof of stabilization efforts that are being initiated by official authorities as CO2 emissions reach to alarming level. The rise in renewable energy consumption boosts economic activity, and real GDP breeds. Most of times, an increase in renewable energy consumption is an effort to substitute it with nonrenewable energy consumption, resulting in lower level of CO2 emissions.Energy Consumption, Real GDP, CO2 Emissions

Does economic growth cause terrorism in Pakistan?

This paper analyzes the relationship between terrorism and economic growth for Pakistan by incorporating capital and trade openness. We used the data from 1971-2010 and have applied ARDL bounds testing approach to cointegration to examine the long run relationship between the variables. The VECM Granger causality approach is used to detect the direction of causality between terrorism and economic growth. Our empirical results confirm the existence of long run relationship between economic growth and terrorism. The Granger causality analysis indicates bidirectional causality between terrorism and capital, trade openness and capital, and terrorism and trade openness. However, unidirectional causality is found running from economic growth to terrorism.Terrorism, Economic Growth, Cointegration and Causality

Does Military Spending Explode External Debt in Pakistan?

This paper explores the effect of military expenditures on external debt in case of Pakistan over the period of 1973-2009. For this purpose, ARDL bounds testing approach is used to examine cointegration between the variables. ADF, P-P and ADF-GLS, Clemente et al. (1998) unit root tests are applied to check the order of integration of variables. OLS and ECM regressions approaches are employed to investigate marginal impact of military spending on external debt in long and short run. Our findings indicate cointegration which confirms long run relationship between military expenditures, external debt, economic growth and investment. The results reveal that a rise in military expenditures increases the stock of external debt. The inverse effect of economic growth on external debt is found and an increase in investment is also increasing external debt in the country. This study invites policy makers to approach the problem of curtailing external debt in innovative ways in case of Pakistan.Military Spending, External Debt, Cointegration

Effect of financial development on agricultural growth in Pakistan: new extensions from bounds test to level relationships and granger causality tests

This study investigates the relationship between financial development and agriculture growth employing Cobb-Douglas function which incorporates financial development as an important factor of production for the period 1971-2011. The ARDL bounds testing approach to cointegration is applied to examine long run relationship between the variables. The direction of causality is detected by VACM Granger causality test and robustness of causality results is tested through innovative accounting approach (IAA). Our findings confirm that the variables are cointegrated for equilibrium long run relationship between agriculture growth, financial development, capital and labor. The results indicate that financial development has a positive effect on agricultural growth. This implies that financial development plays its significant role in stemming agricultural production and hence agricultural growth. The capital use in the agriculture sector also contributes to the agricultural growth. The Granger causality analysis reveals bidirectional causality between agricultural growth and financial development. The robustness of these results is confirmed by innovative accounting approach (IAA). This study has important policy implications for policy making authorities to stimulate agricultural growth by improving the efficiency of financial sector.Agriculture Growth, Financial Development, Cointegration

Does Corruption Increase Financial Development? A Time Series Analysis in Pakistan

The aim of present paper is to investigate the effect of corruption on financial development in Pakistan by using ARDL bounds testing approach to cointegration. The direction of causal relationship between the variables is examined by using VECM granger causality approach. Our empirical findings indicate that corruption promotes financial development. Causality analysis reveals that corruption and financial development are complementary.Financial Development, Corruption, Cointegration

Does defence spending impede economic growth? cointegration and causality analysis for Pakistan

This study revisits the relationship between defence spending and economic growth using Keynesian model in Pakistan by applying ARDL bounds testing approach to cointegration for long run and error correction method for short span of time. Empirical evidence suggests a stable cointegration relationship between defence spending and economic growth. An increase in defence spending retards the pace of economic growth confirming the validation of Keynesian hypothesis in the country. Current economic growth is positively linked with economic growth in previous period while rise in nonmilitary expenditures boosts economic growth. Interest rate is inversely associated with economic growth. Finally, unidirectional causality running from military spending to economic growth is found.Defence Spending, Economic Growth, Cointegration, Causality, Pakistan

Environmental Kuznets Curve and the role of energy consumption in Pakistan

The paper is an effort to fill the gap in the energy literature with a comprehensive country study for Pakistan. We investigate the relationship between CO2 emissions, energy consumption, economic growth and trade openness for Pakistan over the period of 1971-2009. Bounds test for cointegration and Granger causality test are employed for the empirical analysis. The result suggests that there exists long-run relationship among the variables and the Environmental Kuznets Curve (EKC) hypothesis is supported. The significant existence of EKC shows the country's effort to condense CO2 emissions and indicates a reasonable achievement of controlling environmental degradation in Pakistan. Furthermore, we find one-way causal relationship running from income to CO2 emissions. Energy consumption increases CO2 emissions both in the short and long runs. Trade openness reduces CO2 emissions in the long run but it is insignificant in the short run. In addition, the change in CO2 emissions from short run to the long span of time is corrected by about 10 percent each year.CO2 emissions, energy consumption, trade openness

Does financial instability increase environmental pollution in Pakistan?

The present aims to explore the relationship between financial instability and environmental degradation within multivariate framework using time series data for the period1972-2009 in case of Pakistan. The long run relationship is investigated by ARDL bounds testing approach to cointegration, and error correction method is applied to examine short sun dynamics. The stationarity properties of the variables are tested by applying Saikkonen and Lütkepohl (2002) structural break unit root test. Empirical evidence confirms the existence of long run relationship while financial instability increases environmental pollution in the country.Financial Instability, Environment, Cointegration

Does financial instability increase environmental pollution in Pakistan?

The present aims to explore the relationship between financial instability and environmental degradation within multivariate framework using time series data for the period1972-2009 in case of Pakistan. The long run relationship is investigated by ARDL bounds testing approach to cointegration, and error correction method is applied to examine short sun dynamics. The stationarity properties of the variables are tested by applying Saikkonen and Lütkepohl (2002)structural break unit root test. Empirical evidence confirms the existence of long run relationship while financial instability increases environmental pollution in the country.Financial Instability, Environment, Cointegration