Muhammad, Nasir and Muhammad, Shahbaz (2011): War on Terror: Do Military Measures Matter? Empirical Analysis of Post 9/11 Period in Pakistan.
Download (129Kb) | Preview
This paper is the first attempt to investigate the causal relationship between military spending, terrorist attacks and intensity of terrorism in Pakistan, by applying ARDL approach to cointegration and Innovation Accounting approach for causality analysis. The results indicate that war on terror is the major determinant of military spending followed by terrorism intensity and the number of terrorist attacks respectively. The study further finds that terrorism intensity and terrorist attacks Granger-cause military spending but the reverse causality is found absent. The failure of military measures to curtail terrorism and its intensity induces one to suggest greater involvement of civil intelligence agencies by raising their budgets instead of pure military budget.
|Item Type:||MPRA Paper|
|Original Title:||War on Terror: Do Military Measures Matter? Empirical Analysis of Post 9/11 Period in Pakistan|
|English Title:||War on Terror: Do Military Measures Matter? Empirical Analysis of Post 9/11 Period in Pakistan|
|Keywords:||Causality Analysis; Military Spending; Civil Intelligence; Terrorism|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development|
|Depositing User:||Muhammad Shahbaz|
|Date Deposited:||30. Dec 2011 17:32|
|Last Modified:||12. Feb 2013 15:46|
Abadie, A. and Gardeazabal, J. (2003) The economic costs of conflict: a case study of the Basque Country. American Economic Review 93(1), pp: 113-132.
Alesina, A. and Perotti, R. (1993) Income distribution, political instability, and investment. NBER Working Paper No. 4486 National Bureau of Economic Research, Cambridge, MA.
Alesina, A. and Perotti, R. (1996) Income distribution, political instability, and investment. European Economic Review 40(6), pp: 1203-1228.
Alesina, A., Ozler, S., Roubini, N. and Swagel, P. (1996) Political instability and economic growth. Journal of Economic Growth 1(2), pp: 189-212.
Arora, V. and Bayoumi, T. (1993) Economic benefits of reducing military expenditure, Annex II in World Economic Outlook. Washington, DC: International Monetary Fund.
Arshad, S., (2007) India and Pakistan 2007. BBC 2007 Feature.
Arunatilake, N., Jayasuriya, S. and Kelegama, S. (2001) The economic cost of the war in Sri Lanka. Research Studies:Macroeconomic Policy and Planning Series 13 Colombo: Institute of Policy Studies of Sri Lanka.
Barro, R.J. (1991) Economic growth in a cross section of countries. Quarterly Journal of Economics 106(6), pp: 407-443.
Baum, C. F. (2004). A review of Stata 8.1 and its time series capabilities. International Journal of Forecasting 20 (1), pp: 151-161.
Benoit, E. (1978) Growth and defense in developing countries. Economic Development and Cultural Change 26(2), pp: 271-280.
Blomberg, S.B., Hess, G. and Orphanides, A. (2004) The macroeconomic consequences of terrorism. Journal of Monetary Economics 51(5), pp: 1007-1032.
Brophy-Baermann, B. and Conybeare, J.A.C. (1994) Retaliating against terrorism: rational expectations and the optimality of rules versus discretion. American Journal of Political Science 38(1), pp: 196-210.
Brown, R. L., Durbin, J and Evans, J.M. (1975) Techniques for testing the constancy of regression relations over time. Journal of the Royal Statistical Society 37(2), pp: 149-163.
Carroll, D. (2006) A guns vs. taxes? A look at how defense spending affects U.S. federal tax policy. Public Budgeting & Finance 26(2), pp: 59-78.
Cauley, J. and Im, E.I. (1988) Intervention policy analysis of skyjackings and other terrorist incidents. American Economic Review Papers and Proceedings 78(2), pp: 27-31.
Dickey, D. A and Fuller, W. A (1981) Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root. Econometrica 49(4), pp: 1057-1072.
Dickey, D.A and Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association 74 (336), pp: 427-431.
Elliot, G., Rothenberg, T. J., Stock, J. H. (1996) Efficient Tests for an Autoregressive Unit Root. Econometrica 64(4), pp. 813-836.
Enders, W. and Sandler, T. (1993) The effectiveness of anti-terrorism policies: a vector-autoregression-intervention analysis. American Political Science Review 87(4), pp: 829-844.
Engle, R. F and Granger, C. W. J. (1987) Cointegration and error correction representation: estimation and testing. Econometrica 55(2), pp: 251-276.
Feridun, M and Shahbaz, M. (2010) Fighting terrorism: are military measures effective? Empirical evidence from Turkey. Defence and Peace Economics 21(2), 193-205.
Gregory, A. W., Hansen, B. E. (1996) Residual-based tests for cointegration in models with regime shifts. Journal of Econometrics 70 (1), pp: 99-126.
Gupta, S., Clements, B., Bhattacharya, R. and Chakravarti, S. (2004) Fiscal consequences of armed conflict and terrorism in low- and middle-income countries. European Journal of Political Economy 20(2), pp: 403-421.
Jehl. D., (1993) Pakistan is facing terrorist listing, New York Times, April 25, 1993.
Johansen, S., (1992) Cointegration in partial systems and the efficiency of single-equation analysis. Journal of Econometrics 52(3), pp: 389-402.
Knight, M., Loayza, N. and Villanueva, D. (1996) The peace dividend: military spending cuts and economic growth. IMF Staff Papers 43(1), pp: 1-37.
Kronstadt. K. A., (2007) Pakistan and terrorism: A summary, Specialist in Asian Affairs Foreign Affairs, Defense, and Trade Division.
Landes, W. M., (1978) An economic study of U.S. aircraft hijacking, 1961–1976. Journal of Law & Economics 21(1), pp: 1-31.
Lis, P. (2007) Government’s role in fighting terrorism. Finance and Economics 3(2), pp:1-38.
Lum, C., Kennedy, L.W. and Sherley, A.J. (2006) The effectiveness of counter-terrorism strategies. A Campbell Systematic Review 2(4), pp: 1-49.
Morley, B. (2006) Causality between economic growth and immigration: an ARDL bounds testing approach. Economics Letters 90(1), pp: 72-76.
Narayan, P. N. (2005) The saving and investment nexus for China: evidence from cointegration tests. Applied Economics 37(17), pp: 1979-1990.
Nasir, M., Amanat, A., and Rehman, F. Ur. (2011) Determinants of terrorism: A panel data analysis of selected South Asian countries. Singapore Economic Review, 26(2), pp: 175-187.
Oh, W., Lee, K., (2004) Causal relationship between energy consumption and GDP: the case of Korea 1970–1999. Energy Economics 26(1), pp: 51-59.
Omand, D. (2005) Countering international terrorism: the use of strategy. Survival 47(4), pp: 107–116.
Ouattara, B. (2004) Foreign Aid and Fiscal Policy in Senegal, University of Manchester, Manchester, UK.
Pakistan Economic Survey, (2009) The Finance Division, Ministry of Finance, Pakistan.
Pesaran, M. H, Shin Y., (1999) An autoregressive distributed lag modeling approach to cointegration analysis. Chapter 11 in Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial Symposium, Strom S. (ed.). Cambridge University Press: Cambridge.
Pesaran, M. H., Shin, Y., Smith, R., (2001) Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), pp: 289-326.
Richardson Jr., J.M. and Samarasinghe, de A.S.W.R. (1991) Measuring the economic dimensions of Sri Lanka’s ethnic conflict. In: Economic Dimensions of Ethnic Conflict, edited by A. de Samarasinghe and R. Coughlan. New York: St. Martin’s Press.
Rodrik, D. (1999) Where did all the growth go? External shocks, social conflict, and growth collapses. Journal of Economic Growth 4(4), pp: 385-412.
Rousse. S, (2004) Excerpts: Gender and space, Dawn, August 15, 2004
Sandler, T. (2005) Collective versus unilateral responses to terrorism. Public Choice 124 (1-2), pp: 75-93.
Seddighi. H. R, A. Lawler, A. V. Katos., (2006) Applied Econometrics: A Practical Approach. Routledge, London and New York.
Sezgin, S. (1997) Country survey x: defence spending in Turkey. Defence and Peace Economics 8(4), pp: 381-409.
Sezgin, S. (2000) The defense-growth relation: evidence from Greece. In The Economics of Regional Security: NATO, the Mediterranean and South Africa, edited by J. Brauer and K. Hartley. Amsterdam: Harwood Academic Publishers, 113–137.
Sezgin, S. (2001) An empirical analysis of Turkey’s defence-growth relationship with a multi equation model (1956–1994). Defence and Peace Economics 12(1), pp: 69-86.
Shahbaz, M. (2010) Income inequality-economic growth and non-linearity: a case of Pakistan, International Journal of Social Economics, 37, pp: 613-736.
Shahbaz, M., Afza, T and Shahbaz, M. S. (2011) Does Defence Spending Impede Economic Growth? Cointegration and Causality Analysis for Pakistan. Defence and Peace Economics (forthcoming).
Silke, A. (2005) Fire of lolaus: the role of state countermeasures in causing terrorism and what needs to be done. In Root Causes Of Terrorism? Myths, Reality and Ways Forward, edited by T. Bjorgo. Oxford, UK: Routledge.Terör Faturasi: 100 milyar dolar (2006) Radikal Gazetesi. Retrieved 3 January 2008 from http://www.radikal.com.tr/ haber.php?haberno=203451&tarih=04/11/2006.
Turner, P., 2006. Response surfaces for an F-test for cointegration. Applied Economics Letters 13(8), pp: 479-482.
Venieris, Y. P. and Gupta, D. K. (1986) Income distribution and socio political instability as determinants of savings: a cross-sectional model. Journal of Political Economy 94(4), pp: 873-883.
Wolde-Rufael, Y. (2009) The defence spending-external debt nexus in Ethiopia. Defence and Peace Economics 20(5), pp: 423-436.
Zivot, E., Andrews, D. (1992) Further evidence of great crash, the oil price shock and unit root hypothesis. Journal of Business and Economic Statistics, 10 (3), pp: 251-270.