The limited research undertaken thus far to discover the root causes of terrorism in South Asia. This study takes an initiative to explore root causes of terrorism in South Asia by using panel technique during the period of 1980–2011. The results show that GDP per capita decreases terrorism incidence, however, remaining other economic factors i.e., population, unemployment, inflation, poverty, inequality and political instability exhibits the positive association with the terrorism incidence in South Asia. Some exploratory economic factors are more elastic in nature, as income inequality exhibits the largest share i.e., 1.242 %, followed by population growth rate (i.e., 1.125 %) and political instability (i.e., 1.102 %) respectively. Unemployment rate are around one-to-one relationship with the terrorism incidence in this region. In addition, there is a significant relationship between poverty and terrorism incidence, as if there is 1 % increase in poverty rate, incidence of terrorism increases by 0.758 % in FMOLS and 0.654 % in case of DOLS estimators. This result confirm the conventional view i.e., poverty cause terrorism in South Asia. One of the major economic problems arises when price level associates with the terrorism incidence in this region, which further leads to peoples inside the poverty trap. Finally, trade openness does not act in accordance with significant contributor for terrorism incidence in South Asia, however, the importance of trade liberalization polices may not be neglected in relation with terrorism incidence in this region. Copyright Springer Science+Business Media Dordrecht 2014
