Assessing the asymmetric war-growth nexus: A case of Afghanistan

Abstract

This study explores the war-growth nexus in Afghanistan, a country where war-torn acts inform resource allocation. Employing the asymmetric ARDL, dynamic multipliers, and asymmetric causality techniques, the initial results confirm the existence of a long-run asymmetric nexus amid predictors. The asymmetric ARDL results indicate that a positive asymmetric shock from the per capita cost of war reduces per capita GDP—that is, economic growth—while a negative asymmetric shock from the per capita cost of war increases growth in the short and long run. Moreover, the findings reveal that per capita capital investment, per capita energy consumption, per capita household consumption, per capita remittance, per capita foreign direct investment, population growth, and inflation rate have significantly asymmetric effects on growth, highlighting non-monotonic impacts in scale and magnitude. The results of the asymmetric causality technique by bootstrap confirm that there is an asymmetric bidirectional causality between growth, per capita cost of war, per capita household consumption, per capita capital investment, and per capita foreign direct investment, while expanding only unidirectional causality with per capita remittance, population growth, and inflation rate. Based on the findings, the study concludes by offering relevant policy recommendations.