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Economic Consequences of Lower Military Spending: Some Simulation Results

Author

Listed:
  • Mr. Jerald A Schiff
  • Mr. Tamim Bayoumi
  • Mr. Daniel P. Hewitt

Abstract

The IMF MULTIMOD model is used to trace the economic impact of a 20 percent reduction in world military expenditures. GDP falls in the short run, however private consumption and investment rise, leading to an increase in GDP in the medium and long run. The estimated gains to economic welfare are substantial, particularly for developing countries, although most of these gains are realized in the long run. A positive international economic externality is found to exist, implying that for any given country the economic gains from a coordinated reduction in military expenditures exceed the gains from a unilateral reduction.

Suggested Citation

  • Mr. Jerald A Schiff & Mr. Tamim Bayoumi & Mr. Daniel P. Hewitt, 1993. "Economic Consequences of Lower Military Spending: Some Simulation Results," IMF Working Papers 1993/017, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1993/017
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    Citations

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    Cited by:

    1. Hadi Soesastro, 1994. "Military Expenditure and the Arms Trade in the Asian‐Pacific Region," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 8(1), pages 27-47, May.
    2. Mete Feridun & Muhammad Shahbaz, 2010. "Fighting Terrorism: Are Military Measures Effective? Empirical Evidence From Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 21(2), pages 193-205.
    3. Boyce, James K., 1995. "External assistance and the peace process in El Salvador," World Development, Elsevier, vol. 23(12), pages 2101-2116, December.
    4. Mohsen Bahmani-Oskooee & Gour Goswami, 2006. "Military spending and the black market premium in developing countries," Review of Social Economy, Taylor & Francis Journals, vol. 64(1), pages 77-91.
    5. Tal Sadeh, 2011. "Hard Currencies For Hard Times. Terror Attacks And The Choice Of Monetary Anchors," Defence and Peace Economics, Taylor & Francis Journals, vol. 22(4), pages 367-392, June.
    6. Omar, Ayman M.A. & Lambe, Brendan J & Wisniewski, Tomasz Piotr, 2021. "Perceptions of the threat to national security and the stock market," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 504-522.
    7. Denis Larocque & Genevieve Lincourt & Michel Normandin, 2010. "Macroeconomic Effects Of Terrorist Shocks In Israel," Defence and Peace Economics, Taylor & Francis Journals, vol. 21(4), pages 317-336.
    8. Isiaka Akande Raifu & Alarudeen Aminu, 2023. "The effect of military spending on economic growth in MENA: evidence from method of moments quantile regression," Future Business Journal, Springer, vol. 9(1), pages 1-21, December.
    9. Rukhsana Kalim & Muhammad Shahid Hassan, 2014. "Public Defense Spending and Poverty in Pakistan," Hacienda Pública Española / Review of Public Economics, IEF, vol. 211(4), pages 93-115, December.
    10. Mr. Benedict J. Clements & Mr. Sanjeev Gupta & Shamit Chakravarti & Ms. Rina Bhattacharya, 2002. "Fiscal Consequences of Armed Conflict and Terrorism in Low- and Middle-Income Countries," IMF Working Papers 2002/142, International Monetary Fund.
    11. Gupta, Sanjeev & Clements, Benedict & Bhattacharya, Rina & Chakravarti, Shamit, 2004. "Fiscal consequences of armed conflict and terrorism in low- and middle-income countries," European Journal of Political Economy, Elsevier, vol. 20(2), pages 403-421, June.
    12. José Pedro Pontes & Armando J. Garcia Pires, 2020. "(De) industrialization in the Von Thünen’s economy," Working Papers REM 2020/0141, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.

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