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Military Spending and Economic Growth in Greece and the Arms Race between Greece and Turkey

Author

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  • Dimitrios PAPARAS

    (Harper Adams University, U.K.)

  • Christian RICHTER

    (German University in Cairo, Egypt.)

  • Alexandros PAPARAS

Abstract

One of the most important reasons that led Greece to the current macroeconomic instability is the high military spending during the last decades. Thus, it is necessary to examine the impact of military spending on economic growth for the case of Greece. Furthermore, it will be very useful to examine the arms race hypothesis between Greece and Turkey in order to identify if there is an interaction between these countries that leads to the high level of military spending. In this paper we empirically test the relationship between military spending and economic growth for Greece and Turkey during 1957-2013, and examine the validity of arms race hypothesis between the two countries. We deployed unit root tests, unit root tests with structural changes, cointegration techniques and finally Granger causality tests. Granger causality tests in the case of Greece and Turkey imply that the causality runs from military spending to economic growth, however we find that there is no evidence of causality between Greek and Turkish military spending, which mean that that these countries act independently.

Suggested Citation

  • Dimitrios PAPARAS & Christian RICHTER & Alexandros PAPARAS, 2016. "Military Spending and Economic Growth in Greece and the Arms Race between Greece and Turkey," Journal of Economics Library, EconSciences Journals, vol. 3(1), pages 38-56, March.
    • Handle: RePEc:cvv:journ5:v:3:y:2016:i:1:p:38-56
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    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • 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
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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