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Examining the Military Spending Economic Growth Nexus in the Presence of Informality: Evidence from the Balkan Peninsula

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  • Dimitraki Ourania

    (Graduate School of Business, Bedfordshire University, University Square, Luton, LU1 3JU, UK)

  • Emmanouilidis Kyriakos

    (Business Administration and Economics Department, City College, University of York Europe Campus, Thessaloniki, Greece)

  • Asllani Alban

    (Royal Docks School of Business and Law, Business Entrepreneurship and Finance Department, University of East London, University Square Stratford, London, 1 Salway Road, E15 1NF, UK)

Abstract

This paper examines the military expenditure (milex) economic growth nexus, in selected Balkan and peripheral countries from 1990 to 2022, considering the presence of informality within an institutional framework. Specifically, we employ Principal Components Analysis (PCA) to formulate an index of informality and use the Dynamic Ordinary Least Squares (DOLS) and Fully-Modified Ordinary Least Squares (FMOLS) methods to identify the long-run equilibria. To provide a more comprehensive insight, the study also incorporates two types of causality tests – Dumitrescu-Hurlin and Juodis et al. – to determine the direction of the relationships. Our findings indicate that in the long-run milex can be detrimental to economic growth whilst informality boosts it.

Suggested Citation

  • Dimitraki Ourania & Emmanouilidis Kyriakos & Asllani Alban, 2024. "Examining the Military Spending Economic Growth Nexus in the Presence of Informality: Evidence from the Balkan Peninsula," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 30(4), pages 505-523.
    • Handle: RePEc:bpj:pepspp:v:30:y:2024:i:4:p:505-523:n:1004
    DOI: 10.1515/peps-2024-0029
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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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