Pakistan Institute of Development Economics



New Direction to Evaluate the Economic Impact of Peace forBilateral Trade among World Economies

Earlier researchers have been working to relate globalisation,trade or free trade as an instrument for bringing peace and reducingconflict in the world. But this study attempts to open up a new debatethat how social unrest in terms of lack of pace in nations leads tofailure of economic policing and outcomes. In past, few researchers havetried to show peaceful environment as a generator for economic progressby building theoretical models, but limited empirical analysis has beenconducted so far. This brings a novelty in the present study that forthe first time a large set of data covering 155 nations has been used toexplore the relationship between these two desired variables i.e. traderelated variables and peace, in new direction and employing newindicators defining extent of peace in nations. Panel co-integrationtechnique has been applied along with Fully Modified Ordinary LeastSquares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) models to knowthe parametric and non-parametric point estimates of variables. Data hasbeen extracted from Economic Institute of Peace and World Bank for thetime period 2008-2014. Results showed that lesser number of attacks areassociated with more volume of trade among nations and better relationswith neighbouring countries are linked positively with trade performanceof nations. Nations involved more into hostility acts like conflicts areunable to maximise the benefits from bilateral trade. JELClassification: F10, D74, L33, C23. Keywords: Globalisation, Trade,Conflict, Terrorism, Panel Model

Saima Sarwar,

Muhammad Wasif Siddiqi,

Abdul Nasir Nasir,

Zahoor Ahmed