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Should Portuguese economy invest in defense spending? A revisit

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  • Shahbaz, Muhammad
  • Leitão, Nuno Carlos
  • Uddin, Gazi Salah
  • Arouri, Mohamed
  • Teulon, Frédéric

Abstract

In this paper, we investigate the causal relationship between defense spending and economic growth in Portugal during the period of 1980–2010. We apply the ARDL bounds testing approach in the presence of structural break. The ARDL–ECM estimation results disclose that the relations between defense spending, capital, labor and economic growth are country specific. The interesting finding of this study is that there is a U-shaped relationship that exists between defense spending and economic growth. In addition, the unidirectional causality from defense spending to economic growth exists in the case of Portugal. Therefore, defense spending can play an important role in economic development of Portugal.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 35 (2013)
Issue (Month): C ()
Pages: 805-815

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Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:805-815

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Defense spending; Economic growth; Cointegration; Causality; Portugal;

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