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Modeling the Defense-Growth Nexus in a Post-Conflict Country - A Piecewise Linear Approach

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Author Info
Gerhard Reitschuler ()
Ludger J. Löning

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Abstract

The defense-growth nexus is investigated empirically using longitudinal data for Guatemala and allowing the effect of defense spending on growth to be nonlinear. Using recently developed econometric methods involving threshold regressions, evidence of a level-dependent effect of military expenditure on GDP growth is found: a positive and significant externality effect of defense spending prevails for relatively low levels of defense spending and becomes negative, albeit insignificant, for higher levels.

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Publisher Info
Paper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 097.

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Length: 24 pages
Date of creation: 01 Feb 2004
Date of revision:
Handle: RePEc:got:iaidps:097

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Related research
Keywords: Guatemala; defense expenditures; nonlinearity; economic growth; externality effect;

Find related papers by JEL classification:
E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November. [Downloadable!] (restricted)
    Other versions:
  2. Bruce E. Hansen, 2000. "Sample Splitting and Threshold Estimation," Econometrica, Econometric Society, vol. 68(3), pages 575-604, May.
    Other versions:
  3. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March. [Downloadable!] (restricted)
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  4. Hooker, Mark A & Knetter, Michael M, 1997. "The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 400-421, August.
  5. Ram, Rati, 1995. "Defense expenditure and economic growth," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 10, pages 251-274 Elsevier. [Downloadable!] (restricted)
  6. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S103-26, October. [Downloadable!] (restricted)
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  7. Benoit, Emile, 1978. "Growth and Defense in Developing Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 26(2), pages 271-80, January.
  8. Deger, Saadet & Sen, Somnath, 1995. "Military expenditure and developing countries," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 11, pages 275-307 Elsevier. [Downloadable!] (restricted)
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