Impact of Life Expectancy and Terrorism on Capital Formation: Empirical Evidence from Pakistan

This study investigates the association among no of terrorism incidents, age dependency ratio, life expectancy, GDP, growth of population and capital formation percent of GDP in Pakistan for the period 1980-2011. Johansen method of cointegration is used to find the relationship between dependent and explanatory variables. However, the impact of explanatory variables on capital formation percent of GDP except no of terrorism and age dependency ratio is positive in the long run during the period of study. In addition, the negative impact of terrorism on capital formation percent of GDP reflects the fact that terrorist attacks a feasible choice measure up to open war in face of improved state capacity.