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Modelling The Relationship Between Defense Spending And Economic Growth For The Fiji Islands

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  • Paresh Kumar Narayan
  • Baljeet Singh

Abstract

The goal of this paper is to examine the nexus between GDP and military expenditure. We model this relationship within a multivariate framework by including exports in the model. We use the recently developed bounds testing approach to cointegration and find that there is a long run relationship among the variables when GDP is the endogenous variable. Normalizing on GDP and using four different estimators, we find that in the long run both military expenditure and exports have a positive impact on GDP. Finally, using the Granger causality test, we find that there is evidence for military expenditure Granger causing exports and exports Granger causing GDP, implying that military expenditure indirectly Granger causes GDP in the short run. In the long run, we find that both military expenditure and exports Granger cause GDP for Fiji. Our findings are consistent with the Keynesian school of thought, leading us to derive some policy implications.

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Bibliographic Info

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

Volume (Year): 18 (2007)
Issue (Month): 4 ()
Pages: 391-401

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Handle: RePEc:taf:defpea:v:18:y:2007:i:4:p:391-401

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Related research

Keywords: Military expenditure; Fiji; Bounds test for cointegration; Granger causality;

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Cited by:
  1. Shahbaz Muhammad & Carlos Leitao Nuno & Salah Uddin Ghazi & Mohamed Arouri & Frederic Teulon, 2014. "Should Portuguese Economy Invest in Defense Spending? A Revisit," Working Papers 2014-380, Department of Research, Ipag Business School.
  2. Raza, Syed Ali & Shahbaz, Muhammad, 2014. "To Battle Income Inequality, Focus on Military Expenditures: Lesson from Pakistan," MPRA Paper 57773, University Library of Munich, Germany.
  3. 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.
  4. Tiwari, Aviral & Shahbaz, Muhammad, 2011. "Does Defence Spending Stimulate Economic Growth in India?," MPRA Paper 30880, University Library of Munich, Germany, revised 18 Apr 2011.
  5. Muhammad Shahbaz & Talat Afza & Muhammad Shahbaz Shabbir, 2013. "Does Defence Spending Impede Economic Growth? Cointegration And Causality Analysis For Pakistan," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(2), pages 105-120, April.
  6. Gurgul, Henryk & Lach, Lukasz & Mestel, Roland, 2011. "The relationship between budgetary expenditure and economic growth in Poland," MPRA Paper 35784, University Library of Munich, Germany.
  7. Gurgul, Henryk & Lach, Łukasz, 2011. "Causality analysis between public expenditure and economic growth of Polish economy in last decade," MPRA Paper 52281, University Library of Munich, Germany.

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