The Causal Impact of the Taliban’s Insurgency and Return to Power on Economic Well-being in Afghanistan

Abstract

This study examines the causal impact of insurgency and government collapse on economic well-being in Afghanistan. Utilizing Bayesian structural time-series causal impact models, the research investigates the effects of the long-standing Taliban insurgency, the resulting insecurity, and the uncertainty associated with the US policy shift and reduced international aid on Afghanistan's economic well-being. Additionally, the study conducts a counterfactual analysis to assess the hypothetical impact if the Taliban insurgency or restoration had not occurred. The findings demonstrate that international aid has not contributed to sustainable economic well-being, and that the policy shift of the US from counter-terrorism toward engaging in negotiations with the Taliban, has resulted in a significant economic decline. This research offers valuable insights into the intricate relationship between aid dependency, insurgency, political uncertainty, and economic well-being in fragile and aid-dependent states like Afghanistan.