International financial integration is perceived to strengthen the domestic financial system through accumulation of capital and advancement in information technology. However, international financial integration may also propagate the financial contagion through transmission of financial shocks. The study examines the impact of international financial integration on financial contagion in Pakistan using annual data from 1973 to 2017. It employs ARDL model framework that captures both the short run and the long run relationship through bound testing approach and error correction mechanism. Findings reveal that international financial integration has the negative and significant long run relationship with volatility of real effective exchange rate in Pakistan which is in line with the theory. The results also indicate that international financial integration has the positive and significant long run relationship with volatility of domestic credit which may pose threat of financial contagion in Pakistan. However, international financial integration has no relationship with volatility of inflation rate and volatility of real interest rate. The study suggests that Pakistan needs to enhance the international financial integration through deeper international portfolio diversification. In addition to that flexible exchange rate is also important to get potential benefits of international financial integration. Supervisor:- Dr. SAUD AHMED KHAN