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

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Author Info

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

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/1024269052000323542
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    Bibliographic Info

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

    Volume (Year): 16 (2005)
    Issue (Month): 1 ()
    Pages: 45-57

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    Handle: RePEc:taf:defpea:v:16:y:2005:i:1:p:45-57

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    Web page: http://www.tandfonline.com/GDPE20

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    Related research

    Keywords: Arms race; Multivariate threshold models; Defense spending; Economic growth;

    References

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    1. 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.
    2. Dakurah, A. Henry & Davies, Stephen P. & Sampath, Rajan K., 2001. "Defense spending and economic growth in developing countries: A causality analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 651-658, August.
    3. 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.
    4. Weise, Charles L, 1999. "The Asymmetric Effects of Monetary Policy: A Nonlinear Vector Autoregression Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 85-108, February.
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    Cited by:
    1. 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.
    2. Habibullah, M.S. & Law, Siong-Hook & Dayang-Afizzah, A.M., 2008. "Defense spending and economic growth in Asian economies: A panel error-correction approach," MPRA Paper 12105, University Library of Munich, Germany.
    3. 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.
    4. Hsien-Hung Kung & Jennifer C. H. Min, 2013. "Military Spending and Economic Growth Nexus in Sixteen Latin and South American Countries: A Bootstrap Panel Causality Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 171-185, December.

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