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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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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 & Mohammad Habibpour, 2014. "Direct Distribution of Rents and the Resource Curse in Iran: A Micro-econometric Analysis," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201425, Philipps-Universität 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.
  3. Sajjad Faraji Dizaji & Mohammad Reza Farzanegan, 2014. "Political Institutions and Government Spending Behavior in Iran," CESifo Working Paper Series 4620, CESifo Group Munich.
  4. Mohammad Reza Farzanegan & Mozhgan Raeisian Parvari, 2014. "Iranian-Oil-Free Zone and International Oil Prices," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201427, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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