Analysis Of The Effect Of Political Instability On National Economic Development Of Pakistan

Abstract

The role of political stability cannot be overlooked in the socio-economic development process of any country.  The purpose of this study is to evaluate the effect of political instability along with some other controlled variables namely corruption, terrorism and international investment on the national development of Pakistan from the period of 2002 to 2020. Based on the nature of the data, the method of Ordinary Least Squares (OLS) along with the method of Robust Least Squares (RLS) is implemented to obtain more robust results. The regression results showed that FDI is positive significant on national development, while corruption and terrorism are negative and insignificant on economic growth. Political stability shows positive results and significant to economic growth of Pakistan. It is proposed that the government should focus on the issue of terrorism and corruption. Government should adopt policies to control these for the improvement of economic growth in the country. To be most active and effective in tackling terrorism and chronic corruption, it is necessary to get to the roots of the problem. Whereas political interference should be discouraged, improving accountability, as well as enforcing law and regulation for all equally. We additionally used sophisticated Econometrics technique namely Robust Least Square for empirical estimated. The set of variables used in this is visibly different if compared to almost all prior studies.

Keywords: Political stability, terrorism, economic development, Pakistan.