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Defence Spending and Growth in Cyprus: A Causal Analysis

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  • Christos Kollias
  • Charis Naxakisb
  • Leonidas Zarangasb

Abstract

The causal relationship between economic growth and defence spending has attracted considerable attention and has been the subject of many empirical studies. Hoping to contribute to the existing pool of literature, this paper examines the relationship between military expenditure and growth in the case of Cyprus, a small island economy, for the period 1964-99. The findings reported suggest the presence of bi-directional instantaneous causality between defence spending and economic growth.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Defence and Peace Economics.

Volume (Year): 15 (2004)
Issue (Month): 3 ()
Pages: 299-307

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Handle: RePEc:taf:defpea:v:15:y:2004:i:3:p:299-307

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Related research

Keywords: Cyprus; Military expenditure; Causality; Cointegration; Economic growth; Structural breaks; JEL Code: H56;

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References

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  1. Peter Batchelor & J. Paul Dunne & David Saal, 2000. "Military spending and economic growth in South Africa," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(4), pages 553-571.
  2. Zivot, Eric & Andrews, Donald W K, 1992. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(3), pages 251-70, July.
  3. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
  4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  5. Paul Dunne & Eftychia Nikolaidou & Dimitrios Vougas, 2001. "Defence spending and economic growth: A causal analysis for Greece and Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 12(1), pages 5-26.
  6. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  7. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  8. LaCivita, Charles J. & Frederiksen, Peter C., 1991. "Defense spending and economic growth An alternative approach to the causality issue," Journal of Development Economics, Elsevier, vol. 35(1), pages 117-126, January.
  9. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  10. Lee, Tae-Hwy & Tse, Yiuman, 1996. "Cointegration tests with conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 73(2), pages 401-410, August.
  11. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107, September.
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Citations

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Cited by:
  1. Lee, Chien-Chiang & Chang, Chun-Ping, 2005. "Structural breaks, energy consumption, and economic growth revisited: Evidence from Taiwan," Energy Economics, Elsevier, vol. 27(6), pages 857-872, November.
  2. Thomas Gries & Tim Krieger & Daniel Meierrieks, 2009. "Causal Linkages Between Domestic Terrorism and Economic Growth," Working Papers CIE 20, University of Paderborn, CIE Center for International Economics.
  3. Mohammad Reza Farzanegan, 2012. "Military Spending and Economic Growth: The Case of Iran," MAGKS Papers on Economics 201223, Philipps-Universit├Ąt Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Kalyoncu, Huseyin & Yucel, Fatih, 2005. "An analytical approach on defense expenditure and economic growth: the case of Turkey and Greece," MPRA Paper 4262, University Library of Munich, Germany, revised 2006.
  5. Hirnissa, M.T & Habibullah, M.S. & Baharom, A.H., 2008. "Military and Economic Growth in ASEAN-5 Countries," MPRA Paper 13108, University Library of Munich, Germany.
  6. Ucal, Meltem & Karabulut, Gokhan & Bilgin, Mehmet Huseyin, 2009. "Military Expenditures and Inequality: Empirical Evidence from Israel," MPRA Paper 48643, University Library of Munich, Germany.
  7. Glass, Anthony, 2009. "Government expenditure on public order and safety, economic growth and private investment: Empirical evidence from the United States," International Review of Law and Economics, Elsevier, vol. 29(1), pages 29-37, March.
  8. Chien-Chiang Lee & Chun-Ping Chang, 2006. "The Long-Run Relationship Between Defence Expenditures And Gdp In Taiwan," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(4), pages 361-385.
  9. Ageli, Mohammed Moosa & Zaidan, Shatha Mousa, 2012. "Consequential Effects of Defence Expenditure on Economic Growth of Saudi Arabia: 1970-2012," MPRA Paper 46590, University Library of Munich, Germany.
  10. J Paul Dunne, Eftychia Nikolaidou, 2005. "Military Spending and Economic Growth in Greece, Portugal and Spain," Frontiers in Finance and Economics, SKEMA Business School, vol. 2(1), pages 1-17, June.
  11. 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.

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