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Defence spending, economic growth and temporal causality: evidence from Taiwan and mainland China, 1952-1995

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Author Info

  • Tsangyao Chang
  • Wenshwo Fang
  • Li-Fang Wen
  • Chwenchi Liu

Abstract

This paper uses a cointegration analysis and a vector autoregressive model (VAR) to examine the causal relationship between defence spending and economic growth for Taiwan and Mainland China over the period 1952-1995. It is found that these two variables are not cointegrated for both countries studied. The results of the Granger causality tests suggest bidirectional Granger causality (feedback) between defence spending and economic growth for Taiwan, unidirectional Granger causality running from economic growth to defence spending for Mainland China, and unidirectional Granger causality running from Taiwan's defence spending to Mainland China's defence spending for cross-country studied. These results further indicate that there exists no arms race between two countries from both sides of Taiwan strait. Furthermore, impulse responses and variance decompositions are incorporated into the analysis. The results from the impulse responses and variance decompositions tell a similar story.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840122529
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 33 (2001)
Issue (Month): 10 ()
Pages: 1289-1299

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Handle: RePEc:taf:applec:v:33:y:2001:i:10:p:1289-1299

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Cited by:
  1. Chen, Pei-Fen & Lee, Chien-Chiang & Chiu, Yi-Bin, 2014. "The nexus between defense expenditure and economic growth: New global evidence," Economic Modelling, Elsevier, vol. 36(C), pages 474-483.
  2. Gurgul, Henryk & Lach, Ɓukasz & Mestel, Roland, 2012. "The relationship between budgetary expenditure and economic growth in Poland," MPRA Paper 52304, University Library of Munich, Germany.

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