DefinePK

Abstract

Purpose: This study explores the relationship between financial market reactions and geopolitical instability as it relates to Pakistan's paradoxical economic resiliency in the face of ongoing Indo-Pak wars. Despite—or possibly because of—regional tensions, Pakistan's stock market (PSX) may have experienced strong gains, contrary to established beliefs that contend that conflict economies experience capital flight and stagnation.
Design/Methodology/Approach: This review paper used a mixed method approach utilizing both quantitative and qualitative data. For quantitative data PSX’s performance reports, macroeconomic indicators data, and defense spending correlation results has been used. Furthermore, qualitative data was based on geographical case studies and policy documents.
Findings: Three major foundations of Pakistan's economic adaptation are addressed in this review: (1) The PSX's exceptional volatility and investor behavior in conflict-driven markets; (2) France's growing influence in the defense and technology industries; and (3) China's involvement as a financial and strategic backer through CPEC and bilateral bailouts.
Implications/Originality/Value: This study makes the case that Pakistan has created a distinct, if precarious, model of conflict-contingent growth—where crisis-driven alliances and speculative markets momentarily counteract structural weaknesses—by examining macroeconomic trends, changes in foreign direct investment (FDI), and geopolitical alliances.