The Impact of Terrorism on International Trade: A Panel Study for SAARC Countries

Abstract

This study investigates the impact of terrorism on international trade among SAARC countries over the period 1990 to 2022. the study used international trade as a dependent variable, while Terrorism, GDP, Exchange rate and Real-world GDP are independent variables. Before going toward cointegration tests, the study used unit root tests and concluded that some variables were stationary at the level while others were stationary at the level. Unit root test results suggested using the PMG-ARDL model to estimate the long and short-run impact among variables. GDP positively correlates with trade, suggesting that economic growth encourages trade activities; exchange rate fluctuations have mixed effects depending on the appreciation or depreciation of the currency; and real-world GDP changes have a positive spillover effect on trade within the SAARC region and a significant positive impact on terrorism. Government policymakers should consider the issues of terrorism, insecurity, and law to reduce investor skepticism and fully actualize the potential of their trade hosting.