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Causal link between military expenditure and GDP - A study of selected countries

Author

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  • Das, Ramesh Chandra
  • Dinda, Soumyananda
  • Ray, Kamal

Abstract

There has been a great debate for long among the economists and political scientists on the issue of whether there has been any link or causations between GDP and military expenditure of a country. Professor Keynes does not believe on spending on military activities as it is wastage of resources, particularly when there is deficiency of aggregate consumption and investment demands in the economy. The present paper tries to examine whether there are causal link between GDP and military expenditure of randomly selected 20 countries in the world for the period 1988-2013. Applying the concerned time series econometric tools the study reveals that GDP causes military expenditure for seven countries including France, Germany and Italy and military expenditure causes GDP for five countries including USA, Canada, China and India. Bidirectional causalities are observed for Italy and Australia with no way causality observed in six countries including UK and Japan.

Suggested Citation

  • Das, Ramesh Chandra & Dinda, Soumyananda & Ray, Kamal, 2015. "Causal link between military expenditure and GDP - A study of selected countries," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 5(2), pages 114-126.
  • Handle: RePEc:gok:ijdcv1:v:5:y:2015:i:2:p:114-126
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    References listed on IDEAS

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    1. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    2. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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