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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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    More about this item

    Keywords

    Military expenditure; Economic growth; Dynamic panel data; GMM;
    All these keywords.

    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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