Effect of Terrorism on the Economic Growth, Empirical Analysis on the Economy of Pakistan and India

Abstract

In its broadest definition, terrorism is defined as the use of criminal violence to incite fear, usually with the intention of achieving political or religious goals. A targeted nation may experience considerable and severe expenses as a result of terrorism in a variety of ways. By affecting foreign direct investment (FDI), destroying infrastructure, diverting public investment expenditures to security, or restricting trade, terrorist acts have a severe negative economic impact. This study looks at how terrorism has affected Pakistani and Indian economic growth between 2000 and 2020. The study uses terrorism fatalities to measure the terrorism and different control variables were also used to control the effect of macro-economic factors. The study used autoregressive distributed lag model (ARDL) bound testing. The outcome demonstrates a statistically significant inverse association between economic growth and terrorism. Terrorism has the potential to destroy recreational areas and breed insecurity. To improve the capacity of other economic indicators that contribute to Pakistan's prosperity, the terrorism issue must be resolved. More resources must be devoted to enhancing the security and law and order systems in order to boost economic growth. Key Words: