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The Vicious Cycle of the Foreign Military Debt

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  • Vassilis G. Stavrinos
  • George A. Zombanakis
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    Abstract

    This paper aims at estimating first the effects of defense spending on the main determinants of growth, and second the extent to and the channels through which the military debt of Greece influences the overall debt burden of the country, and consequently the critical determinants of economic growth and development. Increased imports of sophisticated weapons and military equipment can be financed at the cost of investment (guns v. ploughshares), or/and at the cost of human capital formation (guns v. butter and chalk), or at the cost of increasing the foreign debt of the country. It is this last case which is investigated in this paper. Our empirical results indicate that whatever the necessity and the benefits of the security aspect of defense, its economic costs are quite substantial. The military as a claimant of resources has a negative and non trivial effect on physical capital accumulation, and human capital formation. Moreover, financing increased military imports through borrowing from abroad has a negative and significant effect on the determinants of growth and development.

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    Bibliographic Info

    Article provided by European Research Studies Journal in its journal European Research Studies Journal.

    Volume (Year): I (1998)
    Issue (Month): 1 (January - March)
    Pages: 5-26

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    Handle: RePEc:ers:journl:v:i:y:1998:i:1:p:5-26

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    Web page: http://www.ersj.eu/

    Related research

    Keywords: Defense Burden; Foreign Military Debt; Growth Rate; Investment; Education;

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    Cited by:
    1. Andreou Andreas S. & Zombanakis George A. & Migiakis Petros M., 2013. "On Defence Expenditure Reduction: Balancing Between Austerity and Security in Greece," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 19(3), pages 437-458, December.
    2. ANDREOU, A. S. & PARSOPOULOS, K. E. & VRACHATIS, M. N. & Zombanakis, George A., 2002. "Searching for the Optimal Defence Expenditure: An Answer in the Context of the Greek – Turkish Arms Race," MPRA Paper 51580, University Library of Munich, Germany, revised 15 Aug 2002.

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