Modeling the Defense-Growth Nexus in a Post-Conflict Country - A Piecewise Linear Approach
AbstractThe 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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Bibliographic InfoPaper provided by Ibero-America Institute for Economic Research in its series Ibero America Institute for Econ. Research (IAI) Discussion Papers with number 097.
Length: 24 pages
Date of creation: 01 Feb 2004
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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; Dynamic Treatment Effect Models &bull Diffusion Processes
- H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
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