![]() ![]() The authors also run forecasting simulations on 6 different VECM models. ![]() Moreover, there is reverse causality between bilateral trade, militarization and conflict low levels of bilateral trade and high militarization are conflict enhancing, equally conflict also reduces bilateral trade and raises militarization. The authors' empirical investigation based on time series econometrics for the period 1950-2005 with causality tests suggests that reduced trade, greater military expenditure, less development expenditure, lower levels of democracy, lower growth rates and less general trade openness are all conflict enhancing. Conflict between the two nations can be best understood in a multivariate framework where variables such as economic performance, integration with rest of the world, bilateral trade, military expenditure, population are simultaneously taken into account. They begin with theoretical models covering the opportunity costs of conflict in terms of trade losses and security spending, as well as the costs of making concessions to rivals. The authors examine whether greater inter-state trade, democracy and reduced military spending lower belligerence between India and Pakistan.
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