Political Instability and Exports Dynamics in Pakistan: A Time Series Approach

Abstract

This study examines the impact of political instability on Pakistan’s export performance from 1980 to 2022. It aims to identify how governance disruptions deter exports growth compared to regional economies. Pakistan has experienced substantial political instability, fluctuating between democratic and military rule since its independence. Its share in global exports is lagging behind bordering economies. Nations like Bangladesh and India have expanded global trade shares, whereas Pakistan’s exports remain constrained by policy unpredictability and institutional weaknesses. Using the Autoregressive Distributed Lag (ARDL) approach, we analyze short- and long-term effects. A composite political instability index incorporates Factors like the state of law and order, internal disputes, and government.. Augmented Dickey-Fuller (ADF) tests verify data stationarity. Political instability establishes significant negative effects on exports both in short-run and long-run. Key transmission channels include disrupted supply chains, unpredictable trade policies, and deteriorating infrastructure. These factors collectively erode Pakistan’s export competitiveness in international markets. Building strong political institutions is critical to mitigating instability. Priority reforms should enhance transparency through open governance mechanisms, strengthen accountability via independent oversight bodies, and reinforce the rule of law with judicial reforms. Such institutional stabilization would create a predictable policy environment conducive to export growth.