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Defense spending and economic growth in Asian economies: A panel error-correction approach

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Author Info
Habibullah, M.S.
Law, Siong-Hook
Dayang-Afizzah, A.M.

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Abstract

Hoping to contribute to the existing pool of literature, this paper examines the relationship between military expenditure and economic growth in selected Asian countries for the period 1989 to 2004. Our panel unit root test suggests that real GDP per capita and military expenditures are )1(I processes, while the Larsson et al. (2001) panel cointegration test indicates that economic growth and military expendirues are cointegrated. Finally, applying the panel error-correction technique proposed by Pesaran et al. (1999), our empirical results show that defense spending and economic growth in the Asian countries under the period of study are not related.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12105.

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Date of creation: 05 Jan 2008
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Handle: RePEc:pra:mprapa:12105

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Related research
Keywords: Military expenditure; Economic growth; Panel unit root; Panel cointegration; Panel error-correction; Asian economies;

Find related papers by JEL classification:
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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  1. Joerding, Wayne, 1986. "Economic growth and defense spending : Granger Causality," Journal of Development Economics, Elsevier, vol. 21(1), pages 35-40, April. [Downloadable!] (restricted)
  2. Chung-Nang Lai & Bwo-Nung Huang & Chin-Wei Yang, 2005. "Defense spending and economic growth across the Taiwan straits: a threshold regression model," Defence and Peace Economics, Taylor and Francis Journals, vol. 16(1), pages 45-57, February. [Downloadable!] (restricted)
  3. LaCivita, Charles J. & Frederiksen, Peter C., 1991. "Defense spending and economic growth An alternative approach to the causality issue," Journal of Development Economics, Elsevier, vol. 35(1), pages 117-126, January. [Downloadable!] (restricted)
  4. Dakurah, A. Henry & Davies, Stephen P. & Sampath, Rajan K., 2001. "Defense spending and economic growth in developing countries: A causality analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 651-658, August. [Downloadable!] (restricted)
  5. Nasir M. Khilji & Akhtar Mahmood, 1997. "Military Expenditures and Economic Growth in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(4), pages 791-808. [Downloadable!]
  6. Baltagi, Badi H & Pinnoi, Nat, 1995. "Public Capital Stock and State Productivity Growth: Further Evidence from an Error Components Model," Empirical Economics, Springer, vol. 20(2), pages 351-59.
  7. Chien-Hsun Chen, 1993. "Causality between Defence Spending and Economic Growth: The Case of Mainland China," Journal of Economic Studies, Emerald Group Publishing, vol. 20(6), pages 37-43, October. [Downloadable!] (restricted)
  8. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May. [Downloadable!] (restricted)
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  9. Yousif Khalifa Al-Yousif, 2002. "Defense Spending and Economic Growth: Some Empirical Evidence from the Arab Gulf Region," Defence and Peace Economics, Taylor and Francis Journals, vol. 13(3), pages 187-197, January. [Downloadable!] (restricted)
  10. Deger, Saadet, 1986. "Economic Development and Defense Expenditure," Economic Development and Cultural Change, University of Chicago Press, vol. 35(1), pages 179-96, October.
  11. Biswas, Basudeb & Ram, Rati, 1986. "Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 361-72, January.
  12. Erdal Karagol & Serap Palaz, 2004. "Does defence expenditure deter economic growth in Turkey? A cointegration analysis," Defence and Peace Economics, Taylor and Francis Journals, vol. 15(3), pages 289-298, June. [Downloadable!] (restricted)
  13. Maddala, G S & Wu, Shaowen, 1999. " A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-52, Special I. [Downloadable!] (restricted)
  14. J. Breitung, . "The Local Power of Some Unit Root Tests for Panel Data," Sonderforschungsbereich 373 1999-69, Humboldt Universitaet Berlin.
  15. Kollias, Christos & Manolas, George & Paleologou, Suzanna-Maria, 2004. "Defence expenditure and economic growth in the European Union: A causality analysis," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 553-569, July. [Downloadable!] (restricted)
  16. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July. [Downloadable!] (restricted)
  17. Rolf Larsson & Johan Lyhagen & Mickael Lothgren, 2001. "Likelihood-based cointegration tests in heterogeneous panels," Econometrics Journal, Royal Economic Society, vol. 4(1), pages 41.
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  18. Frederiksen, P.C., 1991. "Economic Growth and Defense Spending: Evidence on Causality for Selected Asian Countries," Philippine Journal of Development, Philippine Institute for Development Studies, vol. 0(1), pages 131-146. [Downloadable!]
  19. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254. [Downloadable!] (restricted)
  20. M Pesaran & Yongcheol Shin & Ron P Smith, 2004. "Pooled mean group estimation of dynamic heterogeneous panels," ESE Discussion Papers 16, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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