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The Vicious Cycle of the Foreign Military Debt


  • Vassilis G. Stavrinos
  • George A. Zombanakis


This paper aims at estimating first the effects of defense spending on the main determinants of growth, and second the extent to and the channels through which the military debt of Greece influences the overall debt burden of the country, and consequently the critical determinants of economic growth and development. Increased imports of sophisticated weapons and military equipment can be financed at the cost of investment (guns v. ploughshares), or/and at the cost of human capital formation (guns v. butter and chalk), or at the cost of increasing the foreign debt of the country. It is this last case which is investigated in this paper. Our empirical results indicate that whatever the necessity and the benefits of the security aspect of defense, its economic costs are quite substantial. The military as a claimant of resources has a negative and non trivial effect on physical capital accumulation, and human capital formation. Moreover, financing increased military imports through borrowing from abroad has a negative and significant effect on the determinants of growth and development.

Suggested Citation

  • Vassilis G. Stavrinos & George A. Zombanakis, 1998. "The Vicious Cycle of the Foreign Military Debt," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 5-26, January -.
  • Handle: RePEc:ers:journl:v:i:y:1998:i:1:p:5-26

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    Cited by:

    1. Andreou Andreas S. & Zombanakis George A. & Migiakis Petros M., 2013. "On Defence Expenditure Reduction: Balancing Between Austerity and Security in Greece," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 19(3), pages 437-458, December.
    2. ANDREOU, ANDREAS & PARSOPOULOS, KONSTANTINE & VRACHATIS, MICHAEL & Zombanakis, George A., 2003. "Optimal Versus Required Defence Spending," MPRA Paper 78663, University Library of Munich, Germany, revised 14 Jul 2003.
    3. ANDREOU, A. S. & PARSOPOULOS, K. E. & VRACHATIS, M. N. & Zombanakis, George A., 2002. "Searching for the Optimal Defence Expenditure: An Answer in the Context of the Greek – Turkish Arms Race," MPRA Paper 51580, University Library of Munich, Germany, revised 15 Aug 2002.
    4. Bragoudakis Zacharias G. & Zombanakis George A., 2017. "Earning a Peace Dividend in a Crisis Environment: The Greek Case," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 23(3), pages 1-15, August.
    5. Andreou, Andreas & Zombanakis, George, 2003. "Measuring Relative Military Security," MPRA Paper 78660, University Library of Munich, Germany, revised 14 Jul 2003.
    6. Andreou, Andreas S. & Zombanakis, George, 2003. "The Greek-Turkish Arms Race Using Artificial Neural Networks," MPRA Paper 78576, University Library of Munich, Germany, revised 14 Jul 2003.

    More about this item


    Defense Burden; Foreign Military Debt; Growth Rate; Investment; Education;

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems


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