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The Relationship between Defense Spending and Economic Growth: The Case of Turkey

Author

Listed:
  • Karakaya, Ceylan

    (Ataturk University)

  • Sahinoglu, Tuba

    (Ataturk University)

Abstract

Defense spending is an important factor in ensuring the internal and external security of the country. The threats created by different countries or regions for each other cause them to turn to defense spending. Defense expenditures which are carried out to protect national security, have significant effects on the national economy as well. Therefore, the aim of working is to examine the relationship between defense spending and economic growth for Turkish economy. For this purpose, the presence and direction of the impact of defense spending on economic growth in Turkey, was investigated using the 1984-2016 annual data by ARDL (Autoregressive Distributed Lag Model) Bounds Test and Johansen Cointegration Test. Technological development variable is also included in the analysis. Johansen cointegration test results suggests the existence of a negative relationship in the long term for Turkey's economy. The results of ARDL bounds test show that both defense expenditures and technological change have a positive effect on economic growth in the long and short term. On the other hand, according to Granger causality test results, there is a bidirectional causality relationship between defense expenditures and economic growth.

Suggested Citation

  • Karakaya, Ceylan & Sahinoglu, Tuba, 2020. "The Relationship between Defense Spending and Economic Growth: The Case of Turkey," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 11(2), pages 335-351, April.
    • Handle: RePEc:ris:buecrj:0475
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    More about this item

    Keywords

    Public Expenditures; Defense Expenditures; Economic Growth; ARDL Bounds Test; Johansen Cointegration Test;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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