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Defense spending and economic growth across the Taiwan straits: a threshold regression model

Author

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  • Chung-Nang Lai
  • Bwo-Nung Huang
  • Chin-Wei Yang

Abstract

This paper employs both linear and non-linear models to investigate the relationship between national defense spending and economic growth for Taiwan and China. Using data from 1953-2000 on defense spending, GDP, import, export and capital, we find that China's defense spending leads that of Taiwan. There exists the phenomenon of an arms race between both countries when official Chinese data are used. On the one hand, feedback relations prevail between economic growth and defense spending growth in Taiwan. On the other hand, China's national defense is found to lead economic growth.

Suggested Citation

  • Chung-Nang Lai & Bwo-Nung Huang & Chin-Wei Yang, 2005. "Defense spending and economic growth across the Taiwan straits: a threshold regression model," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(1), pages 45-57.
    • Handle: RePEc:taf:defpea:v:16:y:2005:i:1:p:45-57
    DOI: 10.1080/1024269052000323542
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    References listed on IDEAS

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