A dynamic modelling of the regional and international political economy of US aid to Pakistan

Figures & data

Figure 1. Arms imports by India and Pakistan and US economic aid to Pakistan (US$ mil), 1971–2016.

Source: Authors’ work (using the SIPRI data).

Table 1. Variables, description, units, and sources.

Variables	Description & units	Source
US Economic Aid	US economic assistance to Pakistan (US$)	US AID
Pak-India trade (India)	Trade between India and Pakistan (US$)	IMF Direction of Trade Statistics
Pak-Iran trade (Iran)	Trade between India and Pakistan (US$)	IMF Direction of Trade Statistics
Pak-China strategic relations (China)	Chinese defense exports to Pakistan (US$)	Stockholm International Peace and Research Institute (SIPRI)
Indo-Russian strategic relations (Russia)	Russian defense exports to India (US$)	SIPRI
Regional Afghan War	dummy for a US involvement in a war in Afghanistan either directly or indirectly: '1′ for Pak-US strategic engagement during the Cold War period and then in the WOT; '0′ otherwise	Author’s compilation
Political Stability (Polity2)	Political stability ranges between −10 (highly autocratic) to +10 (highly democratic)	PolityIV dataset, Centre for Systemic Peace
GDP	Gross domestic product (US$)	World Development Indicators, World Bank database
Nuclear Warheads	number of nuclear stockpiles	Kristensen and Norris (2013) and SIPRI yearbooks
Terrorism	deaths from high-casualty terrorist bombings	Terrorism database, Centre for Systemic Peace

Table 2. ARDL estimations, US economic aid model, 1971–2016.

Dependent variable: US economic aid.

Method: ARDL (3,2,0,2,1,0,2,1,1,1).

	Long -Run	Short-Run
Independent Variables	coefficient	coefficient
constant		−3.574 (0.362)***
Lag US Economic Aid		−0.393 (0.084)***
Chinese Arms Exports to Pak	−0.539 (0.277)*	0.395 (0.076)***
Russian Arms Exports to India	0.815 (0.311)**
Pak-India Trade	−0.322 (0.147)**	0.069 (0.020)***
Pak-Iran Trade	0.149 (0.316)	−0.191 (0.104)*
GDP	0.781 (0.792)
Regional War (dummy)	2.087 (0.757)**	0.757 (0.199)***
Polity2	0.005 (0.044)	−0.068 (0.015)***
Nuclear Warheads	−0.003 (0.011)	0.047 (0.014)***
Terrorism	0.0003 (0.000)	−0.0007 (0.000)*
Error Correction		−0.681 (0.068)***
F-statistic		11.447
p-value (F-Stat)		0.000
p-value (Jarque-Bera)		0.582
p-value (Breusch-Godfrey)		0.195
p-value (Breusch-Pagan-Godfrey)		0.862
Obs.		43

*, **, *** represent significance at 10, 5, and 1%, respectively.

Standard Errors are given in parentheses.

US Economic Aid, Chinese Arms exports to Pakistan, Russian Arms Exports to India, Pak-India Trade, Pak-Iran Trade, and GDP are taken in log forms.

Table A1. Cointegration test: Engle-Granger.

Null Hypothesis: Series are not cointegrated	Value	Prob.
Engle-Granger tau-statistic	−7.132	0.012
Engle-Granger z-statistic	−107.999	0.000

Table A2. Unit root tests.

		ADF		DF-GLS		PP
#	Variables	t-stat	(Prob.)	t-stat	(Prob.)	t-stat	(Prob.)	Conclusion
1	Chinese Arms Exports to Pak (US$)
	Level (intercept)	−3.1272	(0.0316)	−3.0945	(0.0037)	−3.1093	(0.0329)	I(0)
	First Difference (intercept)	−9.2757	(0.0000)	−9.1328	(0.0000)	−9.8387	(0.0000)
2	Russian Arms Exports to India (US$)
	Level (intercept)	−2.4862	(0.1255)	−2.4589	(0.0179)	−2.6052	(0.0994)	I(0)
	First Difference (intercept)	−6.1498	(0.0000)	−6.1127	(0.0000)	−6.5225	(0.0000)
3	Pak-India Trade (US$)
	Level (intercept & trend)	−2.2481	(0.4525)	−2.1174	(0.0399)	−2.1572	(0.5009)	I(1)
	First Difference (intercept & trend)	−9.2651	(0.0000)	−9.4829	(0.0000)	−9.4031	(0.0000)
4	Pak-Iran Trade (US$)
	Level (intercept)	−2.1779	(0.2169)	−1.9356	(0.0594)	−2.3461	(0.1626)	I(1)
	First Difference (intercept)	−5.7598	(0.0000)	−5.8091	(0.0000)	−5.7434	(0.0000)
5	US Economic Aid (US$)
	Level (intercept & trend)	−2.6761	(0.2509)	−2.6982	(0.0098)	−2.7594	(0.2193)	I(1)
	First Difference (intercept & trend)	−6.6374	(0.0000)	−6.7567	(0.0000)	−7.1024	(0.0000)
6	GDP (US$)
	Level (intercept & trend)	0.9809	(0.9998)	−1.4516	(0.1553)	1.1903	(0.9999)	I(1)
	First Difference (intercept & trend)	−5.8549	(0.0001)	−5.9479	(0.0000)	−5.8605	(0.0001)
7	Polity2
	Level (intercept)	−1.9098	(0.3250)	−1.9087	(0.0628)	−2.1549	(0.2251)	I(1)
	First Difference (intercept)	−6.2685	(0.0000)	−6.3422	(0.0000)	−6.2713	(0.0000)
8	Nuclear Warheads
	Level (intercept)	−0.5154	(0.8766)	−1.2767	(0.2130)	4.6475	(1.0000)	I(1)
	First Difference (intercept & trend)	−2.1769	(0.4874)	−1.9141	(0.0663)	−3.5882	(0.0425)
9	Terrorism (HCTB total deaths)
	Level (intercept)	−4.2551	(0.0018)	−4.2762	(0.0002)	−2.1561	(0.2247)	I(0)
	First Difference (intercept)	−2.7621	(0.0733)	−2.8316	(0.0081)	−7.0941	(0.0000)

ADF = Augmented Dickey-Fuller test.

DF-GLS = Dickey-Fuller Generalised Least Squares test.

PP = Phillips-Perron test.

Note: The conclusion is drawn on commonalities in results derived from (at least) two unit root tests.

Table A3. F- Bounds test results.

Null Hypothesis: No levels relationship
Test Statistic	Value	Signif.	I(0)	I(1)
			Asymptotic: n = 1000
F-statistic	6.8897	10%	1.88	2.99
k	9	5%	2.14	3.3
		2.5%	2.37	3.6
		1%	2.65	3.97
Actual Sample Size	43		Finite Sample: n = 45
		10%	−1	−1
		5%	−1	−1
		1%	−1	−1
			Finite Sample: n = 40
		10%	−1	−1
		5%	−1	−1
		1%	−1	−1

Table A4. t-Bounds test results.

Null Hypothesis: No levels relationship
Test Statistic	Value	Signif.	I(0)	I(1)
t-statistic	−5.0081	10%	−2.57	−4.56
		5%	−2.86	−4.88
		2.5%	−3.13	−5.18
		1%	−3.43	−5.54

Kristensen, H. M., and R. S. Norris. 2013. “Global Nuclear Weapons Inventories: 1945–2013.” Bulletin of the Atomic Scientists 69 (5): 75–81. https://doi.org/10.1177/0096340213501363.

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Data availability statement

The data that support the findings of this study are available from the corresponding author upon reasonable request.