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Panel Causality Analysis Between Defence Expenditure and Economic Growth in Developed Countries

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  • Metehan Yilg�r
  • Erdal Tanas Karag�l
  • Çiğdem Ates Saygili

Abstract

There is much controversy in the literature over whether military expenditures have a positive, negative or no relation impact on economic growth. The aim of this paper is to determine the relationship between GDP and defence expenditure. The study analyses GDP and defence expenditures of the developed countries with cross-sectional ADF and SURADF unit root tests using annual data for the years 1980-2007. We conclude that in the long term, according to the Pedroni cointegration test, there exists a relationship between defence expenditure and economic growth. Furthermore, by utilizing the Granger causality test, we find that defence expenditure is a factor in economic growth. In other words, our study validates the hypothesis that defence spending by economically developed countries positively contributes to their economics.

Suggested Citation

  • Metehan Yilg�r & Erdal Tanas Karag�l & Çiğdem Ates Saygili, 2014. "Panel Causality Analysis Between Defence Expenditure and Economic Growth in Developed Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(2), pages 193-203, April.
    • Handle: RePEc:taf:defpea:v:25:y:2014:i:2:p:193-203
    DOI: 10.1080/10242694.2012.724879
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    Cited by:

    1. Uk Heo & Min Ye, 2016. "Defense Spending and Economic Growth around the Globe: The Direct and Indirect Link," International Interactions, Taylor & Francis Journals, vol. 42(5), pages 774-796, October.
    2. Abdulnasser Hatemi-J & Tsangyao Chang & Wen-Yi Chen & Feng-Li Lin & Rangan Gupta, 2015. "Asymmetric Granger Causality between Military Expenditures and Economic Growth in Top Six Defense Suppliers," Working Papers 201565, University of Pretoria, Department of Economics.
    3. Christos Kollias & Suzanna-Maria Paleologou, 2019. "Military spending, economic growth and investment: a disaggregated analysis by income group," Empirical Economics, Springer, vol. 56(3), pages 935-958, March.

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