The Greek-Turkish rivalry: A Bayesian VAR approach

The ongoing Greek-Turkish antagonism has triggered the interest of defense economists to explore whether the two nations are engaged in an arms race. The issues that divide them are complex and rooted in years of conflict and mutual distrust. However, efforts to resolve their disputes have so far been unsuccessful, and rapprochements have invariably been short-lived. Following gas discoveries in the eastern Mediterranean, the states nearly came to blows in 2020 and enacted military expansion plans, further risking escalation. Since empirical studies examining the relationship between their military expenditures do not offer common answers, we use a novel Bayesian technique applied to VAR models to investigate the possible interdependence between four different proxies of the states’ physical arms build-up. Based on an annual dataset running from 1960 to 2020, we find that a shock in a country’s military expenditure does not have an impact on the opponent’s spending. Thus, in distinction to those focusing on the costly maintenance of strategic balance, it is important that these rivals strengthen their cooperation and jointly contribute to the advancement of peace and economic development across the entire area.