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Military expenditure and economic growth across different groups: A dynamic panel Granger-causality approach

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  • Chang, Hsin-Chen
  • Huang, Bwo-Nung
  • Yang, Chin Wei

Abstract

Applying GMM (Arellano and Bond, 1991) to panel data of 90 countries spanning over 1992–2006, this paper explores possible relationships between military expenditure and economic growth. Based on the definitions of income levels by the World Bank – high, middle and low – our results indicate military spending leads negatively economic growth for the panels of low income countries with a marginally significance level of 10%. Of four different regional panels (Africa, Europe, the Middle East–South Asia and Pacific Rim), a negative but stronger (5% significance level) causal relationship from military expenditure to economic growth is found for the Europe and Middle East–South Asia regions.

Suggested Citation

  • Chang, Hsin-Chen & Huang, Bwo-Nung & Yang, Chin Wei, 2011. "Military expenditure and economic growth across different groups: A dynamic panel Granger-causality approach," Economic Modelling, Elsevier, vol. 28(6), pages 2416-2423.
  • Handle: RePEc:eee:ecmode:v:28:y:2011:i:6:p:2416-2423
    DOI: 10.1016/j.econmod.2011.06.001
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    Cited by:

    1. Wang, Tung-Pao & Shyu, Stacy Huey-Pyng & Chou, Han-Chung, 2012. "The impact of defense expenditure on economic productivity in OECD countries," Economic Modelling, Elsevier, vol. 29(6), pages 2104-2114.
    2. Tsung-pao Wu & Dian Fan & Tsangyao Chang, 2016. "The Relationship Between Globalization And Military Expenditures In G7 Countries: Evidence From A Panel Data Analysis," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(3), pages 285-302.
    3. Ryan A. Compton & Bryan Paterson, 2016. "Military Spending and Growth: The Role of Institutions," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(3), pages 301-322, June.
    4. Kollias, Christos & Paleologou, Suzanna-Maria, 2013. "Guns, highways and economic growth in the United States," Economic Modelling, Elsevier, vol. 30(C), pages 449-455.
    5. Chen, Pei-Fen & Lee, Chien-Chiang & Chiu, Yi-Bin, 2014. "The nexus between defense expenditure and economic growth: New global evidence," Economic Modelling, Elsevier, vol. 36(C), pages 474-483.
    6. Ming Zhong & Tsangyao Chang & Samrat Goswami & Rangan Gupta, 2014. "The Nexus between Military Expenditures and Economic Growth in the BRICS and the US: A Bootstrap Panel Causality Test," Working Papers 201449, University of Pretoria, Department of Economics.
    7. repec:bla:rdevec:v:21:y:2017:i:3:p:511-526 is not listed on IDEAS
    8. repec:cmj:seapas:y:2018:i:16:p:97-106 is not listed on IDEAS
    9. Ahad, Muhammad & Dar, Adeel Ahmad, 2017. "Modeling the Asymmetric Impact of Defense Spending on Economic Growth: An Evidence from Nonlinear ARDL and Multipliers," MPRA Paper 80085, University Library of Munich, Germany, revised 2017.
    10. Abdulnasser Hatemi-J & Tsangyao Chang & Wen-Yi Chen & Feng-Li Lin & Rangan Gupta, 2015. "Asymmetric Granger Causality between Military Expenditures and Economic Growth in Top Six Defense Suppliers," Working Papers 201565, University of Pretoria, Department of Economics.
    11. repec:bla:afrdev:v:29:y:2017:i:3:p:429-445 is not listed on IDEAS
    12. Cosimo Magazzino & Lorenzo Giolli & Marco Mele, 2015. "Wagner’s Law and Peacock and Wiseman’s Displacement Effect in European Union Countries: A Panel Data Study," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 812-819.
    13. Christian Grabas & Alexander Nützenadel, 2013. "Industrial Policies in Europe in Historical Perspective," WWWforEurope Working Papers series 15, WWWforEurope.
    14. Hsien-Hung Kung & Jennifer C. H. Min, 2013. "Military Spending and Economic Growth Nexus in Sixteen Latin and South American Countries: A Bootstrap Panel Causality Test," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 171-185, December.
    15. Sakiru Adebola Solarin, 2016. "Sources of labour productivity: a panel investigation of the role of military expenditure," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(2), pages 849-865, March.
    16. Shahbaz, Muhammad & Khraief, Naceur & Kumar Mahalik, Mantu & Khan, Saleheen, 2018. "Military Spending Response to Defense Shocks? International Evidence," MPRA Paper 87362, University Library of Munich, Germany, revised 12 Jun 2018.
    17. repec:wfo:wstudy:46867 is not listed on IDEAS
    18. repec:eco:journ1:2017-03-42 is not listed on IDEAS
    19. Suna Korkmaz, 2015. "The Effect of Military Spending on Economic Growth and Unemployment in Mediterranean Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 273-280.
    20. repec:spr:qualqt:v:52:y:2018:i:3:d:10.1007_s11135-017-0512-9 is not listed on IDEAS
    21. Jülide Yildirim & Nadir Öcal, 2016. "Military expenditures, economic growth and spatial spillovers," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(1), pages 87-104, February.
    22. Mehmet Akif Destek & Ilyas Okumus, 2016. "Military Expenditure and Economic Growth in Brics and Mist Countries: Evidence from Bootstrap Panel Granger Causality Analysis," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 14(2), pages 175-186.

    More about this item

    Keywords

    Military expenditure; Economic growth; Dynamic panel data; GMM;

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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