ABSTRACT: The aim of the study is to examine how and when terrorism start in the country. Terrorism spoil the infra structure of a country. We analyze the effect of Terrorism on the economic growth in Pakistan by using annually time series data from 1970 to 2015. We have employed Autoregressive Distributed Lag model (ARDL) to examine the long run relationship of Terrorism and Economic growth in Pakistan. Data is gathered from World Development Indicator (WDI) and Global Terrorism Database (GTD). The short run dynamics are obtained through Error Correction Mechanism. The empirical results reveal that terrorism has negative impact on the Economic Growth and reduce the speed of economic growth. It also reduces foreign direct investment (FDI) in the country which results less investment. Whenever investment decreases the employment opportunities also reduce and unemployment creates in country. Unemployment creates aggression among people which is one of the causes of terrorism.
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