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Defense Expenditures, External Public Debt and Growth in Developing Countries

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  • Robert E. Looney

    (Naval Postgraduate School, Monterey, California)

  • P.C. Frederiksen

    (Naval Postgraduate School, Monterey, California)

Abstract

This study reexamines the relationship between growth and defense spending in developing countries. It differs from previous studies as it recognizes differences in the borrowing capacity of each country. We hypothesize that a negative relationship will exist between defense and economic growth in countries which are financially resource constrained, and a positive relationship will exist in countries which are relatively resource unconstrained. A factor and discriminate analysis are used to group countries. The variables chosen for the factor analysis depict a country's external debt, structural condition, growth, and balance of payments position. Regression equations were estimated for the total sample and each group, with the growth in Gross Domestic Product as the dependent variable. The results confirm the hypothesized positive relationship between defense and growth in the unconstrained group, but was not confirmed for the constrained group. The results suggest the importance of variables such as foreign ex change, net inflows of capital, external debt, and the growth of the public sector in general, on economic growth.

Suggested Citation

  • Robert E. Looney & P.C. Frederiksen, 1986. "Defense Expenditures, External Public Debt and Growth in Developing Countries," Journal of Peace Research, Peace Research Institute Oslo, vol. 23(4), pages 329-337, December.
    • Handle: RePEc:sae:joupea:v:23:y:1986:i:4:p:329-337
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    Cited by:

    1. Erdal Karagol, 2005. "Defence expenditures and external debt in Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(2), pages 117-125.
    2. Fotios Misopoulos & Vicky Manthou & Zenon Michaelides, 2019. "Environmental and Social Sustainability in UK Construction Industry: a Systematic Literature Review," European Journal of Economics and Business Studies Articles, Revistia Research and Publishing, vol. 5, January -.
    3. Manamperi, Nimantha, 2016. "Does military expenditure hinder economic growth? Evidence from Greece and Turkey," Journal of Policy Modeling, Elsevier, vol. 38(6), pages 1171-1193.
    4. Muhammad Shahbaz & Muhammad shahbaz Shabbir & Muhammad sabihuddin Butt, 2016. "Does Military Spending Explode External Debt in Pakistan?," Defence and Peace Economics, Taylor & Francis Journals, vol. 27(5), pages 718-741, September.
    5. Mie Augier & Robert McNab & Jerry Guo & Phillip Karber, 2017. "Defense spending and economic growth: evidence from China, 1952–2012," Defence and Peace Economics, Taylor & Francis Journals, vol. 28(1), pages 65-90, January.
    6. Erdal Karagol & Selami Sezgin, 2004. "DO defence expenditures increase debt rescheduling in Turkey? probit model approach," Defence and Peace Economics, Taylor & Francis Journals, vol. 15(5), pages 471-480.
    7. J. Paul Dunne † & Sam Perlo-Freeman ‡ & Aylin Soydan §, 2004. "Military expenditure and debt in small industrialised economies: A panel analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 15(2), pages 125-132, April.
    8. 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.
    9. Paresh Kumar Narayan & Russell Smyth, 2007. "The Military Expenditure-External Debt Nexus: New Evidence From A Panel Of Middle Eastern Countries," Monash Economics Working Papers 17-07, Monash University, Department of Economics.
    10. Andreas G Georgantopoulos, 2011. "The Interrelationship between Military Expenditure and External Debt: Patterns of Causation in Northern Africa Countries," Journal of Economics and Behavioral Studies, AMH International, vol. 3(4), pages 264-273.
    11. Eftychia Nikolaidou, 2016. "The role of military expenditure and arms imports in the Greek debt crisis," Economics of Peace and Security Journal, EPS Publishing, vol. 11(1), pages 18-27, April.
    12. Erdal Karagol & Aziz Turhan, 2008. "External Debt, Defence Expenditures And Political Business Cycles In Turkey," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(3), pages 217-224.
    13. Paresh Kumar Narayan & Seema Narayan, 2008. "Does Military Expenditure Determine Fiji'S Exploding Debt Levels?," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(1), pages 77-87.
    14. Pavel Yakovlev, 2007. "Arms Trade, Military Spending, And Economic Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(4), pages 317-338.
    15. Zhang, Xiaoyan & Chang, Tsangyao & Su, Chi-Wei & Wolde-Rufael, Yemane, 2016. "Revisit causal nexus between military spending and debt: A panel causality test," Economic Modelling, Elsevier, vol. 52(PB), pages 939-944.
    16. Thomas Bernauer & Vally Koubi & Fabio Ernst, 2009. "National and Regional Economic Consequences of Swiss Defense Spending," Journal of Peace Research, Peace Research Institute Oslo, vol. 46(4), pages 467-484, July.
    17. Ebru ÖZGÜR GÜLER & Hüseyin GÜLER, 2012. "Investigation of Armed Forces from the Atlantic Ocean to the Ural Mountains," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(4), pages 115-124, August.
    18. Waszkiewicz Grzegorz, 2016. "Drivers of Greek and Turkish Defense Spending," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 51(1), pages 33-46, September.
    19. W. Robert J. Alexander, 2013. "The Defence-Debt Nexus: Evidence From The High-Income Members Of Nato," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(2), pages 133-145, April.
    20. Winston Moore & Chrystol Thomas, 2010. "A meta‐analysis of the relationship between debt and growth," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 9(3), pages 214-225, September.

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