TERRORISM AND THE ECONOMY IMPACT OF MEDIA ON FINANCIAL MARKETS OF PAKISTAN

Abstract

The study investigates the transmission channel of media coverage of terrorism through which terrorism effect financi al markets of Pakistan using a daily time series data from January 1 S\ 2010 to December 31 5\ 2012. For the analysis a unique data set of media coverage of terrorism was constructed on the basis of number of articles published, position of the articles, photographed and size of headlines. The data relating to media coverage of terrorism has been collected from major three national newspapers namely, daily Dawn, The news and Nawa I waqt. The media coverage of terrorism has been quantified by valuing the opportunity cost of the free coverage that has been enjoyed by terrorist group. This variable has been successfully implied in the econometric analysis. For finding the transmission channel unrestricted VAR technique has been implied. From the estimation results it was found that media plays a vital role in the magnification of damage to the fmancial markets in giving coverage to act of terrorism. For testing the short fUll and long run impact ARDL technique has been used. From the ARDL test it has been found that the effect of the media coverage of terrorism on the financial markets is of transitory nature, not a permanent one. This is indicative of the fact that the financial markets are resilient to shock of terrorist attack in the long fUll.