The Impact of Political Instability on Economic Growth in Pakistan: Application of ARCH Model

Authors

Dr. Ghulam Mustafa

Assistant Professor, Department of Political Science and International Relations, Government College University Faisalabad, Pakistan

Adnan Nawaz

Lecturer, Department of Political Science and International Relations , Government College University Faisalabad, Pakistan

Musharaf Rubab

Department of Political Science and International Relations, Government College University Faisalabad, Pakistan

DOI: https://doi.org/10.35484/pssr.2017(1-II)02

Keywords

Political Instability Economic Growth ARCH Model Pakistan

Abstract

The purpose of the study is to determine the impact of political instability on economic growth. For this purpose, we measured political instability by means of three proxies: terrorism, govt. type and election year whereas economic growth is determined with GDP annual growth rate. We used data from 1988 to 2016 and applied ARCH model as our dependent variable (economic growth) is subject to heteroscedasticy and ARCH effect. The results showed that political instability measured with terrorism and election year has negative effect on economic growth. However, govt. type is also found to be negative though insignificant. The study adds to the literature of Pakistan and is helpful for policymakers and investors