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Military spending and economic growth: the case of Iran

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  • Farzanegan, Mohammad Reza

Abstract

Iranian government budget on military over the last decade has been higher than the average of the world. The current increasing international sanctions aim to reduce the military capabilities and capacities of the Iranian government. In this study, we analyze the response of the Iranian economy to shocks in its military budget from 1959-2007, using Impulse Response Functions (IRF) and Variance Decomposition Analysis (VDA) techniques. The Granger causality results show that there is unidirectional causality from military spending to the economic growth. The response of income growth to increasing shocks in the military budget is positive and statistically significant.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35498.

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Date of creation: 20 Dec 2011
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Handle: RePEc:pra:mprapa:35498

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Keywords: Military spending; Economic growth; VAR model; Impulse Response; Sanctions; Iran;

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Cited by:
  1. Mohammad Reza Farzanegan & Sajjad Faraji Dizaji, 2014. "Political Institutions and Government Spending Behavior in Iran," MAGKS Papers on Economics 201403, Philipps-Universit├Ąt Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Muhammad, Shahbaz & Reza, Sherafatian-Jahromi & Muhammad, Nasir Malik, 2012. "Linkages between Defence Spending and Income Inequality in Iran," MPRA Paper 41983, University Library of Munich, Germany, revised 14 Oct 2012.

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