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Can We Declare Military Keynesianism Dead?

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Author Info
Luca Pieroni () (University of Perugia and UWE, Bristol)
Giorgio d'Agostino (University of Perugia.)
Marco Lorusso (University of Verona.)
Abstract

This paper empirically tests the Keynesian hypothesis that government defence spending positively impacts on aggregate output, by using a long run equilibrium model for the US and the UK. Our contribution, with respect to previous works, is twofold. First, our inferences are adjusted for structural breaks exhibited by the data concerning fiscal and monetary variables. Second, we take into account different dynamics between defence spending on aggregate output, showing that the results are sensitive to sub-sample choices. Though the estimated elasticities in both countries show a lack of significance in the more recent years of the sample, defence spending priorities addressed to international security may revitalize pro-cyclical effects in the UK, by an industrial policy of defence shared with the EU members.

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Publisher Info
Paper provided by University of the West of England, Department of Economics in its series Discussion Papers with number 0804.

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Length: 24 pages
Date of creation: Feb 2008
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Handle: RePEc:uwe:wpaper:0804

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Web page: http://www.uwe.ac.uk/bbs/acad/econ/econ.shtml
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Related research
Keywords: Military spending output long run models

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Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
H4 - Public Economics - - Publicly Provided Goods

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