IDEAS home Printed from https://ideas.repec.org/a/spr/ijoeps/v19y2025i2d10.1007_s42495-025-00151-9.html

Unpacking the impact of military spending on economic growth in resource-rich nations

Author

Listed:
  • Michael Aondohemba Akume

    (Afreximbank)

  • Seyi Saint Akadiri

    (European University of Lefke)

Abstract

In this study, we explore Emile Benoit's seminal work from 1978, where he championed the idea that military spending could be a catalyst for economic growth. Our research delves into the multifaceted impact of military expenditure on economic development, embracing both linear and nonlinear dimensions. We meticulously account for other pivotal macroeconomic factors, including exchange rates, foreign direct investment, inflation, and total public debt. Our investigation spans from 1980 to 2021, with Nigeria as our focal point. To empirically analyze this relationship, we employ the Autoregressive Distributed Lag (ARDL) framework and introduce a nonlinear ARDL model, considering the statistical characteristics of the data series. Our empirical findings unveil intriguing nonlinear and asymmetric associations between military spending and economic growth in the Nigerian context. We ascertain that positive military expenditure yields a positive yet statistically insignificant impact on economic growth. In contrast, negative military spending exerts a notably negative and statistically significant influence on economic growth, persisting in both short-term (0.072) and long-term (0.265) dynamics. Addressing the economic implications of military expenditure in Nigeria requires a balanced approach. Enhancing fiscal transparency and accountability in defence expenditures, coupled with efforts to diversify the economy, can mitigate the adverse effects of military spending on growth. Furthermore, fostering institutional reforms and investing in human capital development can help reduce the dependence on resource rents and promote sustainable economic growth.

Suggested Citation

  • Michael Aondohemba Akume & Seyi Saint Akadiri, 2025. "Unpacking the impact of military spending on economic growth in resource-rich nations," International Journal of Economic Policy Studies, Springer, vol. 19(2), pages 275-298, August.
    • Handle: RePEc:spr:ijoeps:v:19:y:2025:i:2:d:10.1007_s42495-025-00151-9
    DOI: 10.1007/s42495-025-00151-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s42495-025-00151-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s42495-025-00151-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. H. Sonmez Atesoglu, 2009. "Defense Spending And Aggregate Output In The United States," Defence and Peace Economics, Taylor & Francis Journals, vol. 20(1), pages 21-26.
    2. Barro, Robert J, 1989. "The Ricardian Approach to Budget Deficits," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 37-54, Spring.
    3. James R. Markusen, 2004. "Multinational Firms and the Theory of International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262633078, December.
    4. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    5. Blomström, Magnus & Kokko, Ari, 1997. "Regional Integration and Foreign Direct Investment," CEPR Discussion Papers 1659, Centre for Economic Policy Research.
    6. Aizenman, Joshua & Marion, Nancy P, 1993. "Policy Uncertainty, Persistence and Growth," Review of International Economics, Wiley Blackwell, vol. 1(2), pages 145-163, June.
    7. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    8. Balassa, Bela, 1978. "Exports and economic growth : Further evidence," Journal of Development Economics, Elsevier, vol. 5(2), pages 181-189, June.
    9. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-578, May.
    10. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies, vol. 22(4), pages 570-615, August.
    11. H. Sonmez Atesoglu, 2004. "Defense spending and investment in the United States," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 27(1), pages 163-170.
    12. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    13. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
    14. Bekaert, Geert & Harvey, Campbell R., 1997. "Emerging equity market volatility," Journal of Financial Economics, Elsevier, vol. 43(1), pages 29-77, January.
    15. Rapetti Martin, 2020. "The Real Exchange Rate and Economic Growth: A Survey," Journal of Globalization and Development, De Gruyter, vol. 11(2), pages 1-054, December.
    16. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
    17. H. Sonmez Atesoglu, 2002. "Defense Spending Promotes Aggregate Output in the United States--Evidence from Cointegration Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(1), pages 55-60.
    18. repec:uwe:journl:v:8:y:2013:i:1:p:5-11 is not listed on IDEAS
    19. Ram, Rati, 1986. "Government Size and Economic Growth: A New Framework and Some Evidencefrom Cross-Section and Time-Series Data," American Economic Review, American Economic Association, vol. 76(1), pages 191-203, March.
    20. Laura Alfaro & Andrew Charlton, 2009. "Intra-industry Foreign Direct Investment," American Economic Review, American Economic Association, vol. 99(5), pages 2096-2119, December.
    21. repec:bla:econom:v:41:y:1974:i:162:p:176-93 is not listed on IDEAS
    22. Dao Thi-Thieu Ha & Nga Thi Hoang, 2020. "Exchange Rate Regime and Economic Growth in Asia: Convergence or Divergence," JRFM, MDPI, vol. 13(1), pages 1-15, January.
    23. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    24. Spilioti, Stella & Vamvoukas, George, 2015. "The impact of government debt on economic growth: An empirical investigation of the Greek market," The Journal of Economic Asymmetries, Elsevier, vol. 12(1), pages 34-40.
    25. Abdulkarim Yusuf & Saidatulakmal Mohd & David McMillan, 2021. "The impact of government debt on economic growth in Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1946249-194, January.
    26. Brainard, S Lael, 1997. "An Empirical Assessment of the Proximity-Concentration Trade-off between Multinational Sales and Trade," American Economic Review, American Economic Association, vol. 87(4), pages 520-544, September.
    27. J. Paul Dunne & Nan Tian, 2013. "Military expenditure and economic growth: A survey," Economics of Peace and Security Journal, EPS Publishing, vol. 8(1), pages 5-11, April.
    28. Mariana Hatmanu & Cristina Cautisanu & Mihaela Ifrim, 2020. "The Impact of Interest Rate, Exchange Rate and European Business Climate on Economic Growth in Romania: An ARDL Approach with Structural Breaks," Sustainability, MDPI, vol. 12(7), pages 1-23, April.
    29. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 584-584.
    30. A. W. Phillips, 1958. "The Relation Between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957," Economica, London School of Economics and Political Science, vol. 25(100), pages 283-299, November.
    31. Ã…dne Cappelen & Nils Petter Gleditsch & Olav Bjerkholt, 1984. "Military Spending and Economic Growth in the OECD Countries," Journal of Peace Research, Peace Research Institute Oslo, vol. 21(4), pages 361-373, December.
    32. Giorgio d’Agostino & John Paul Dunne & Luca Pieroni, 2019. "Military Expenditure, Endogeneity and Economic Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(5), pages 509-524, July.
    33. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
    34. 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.
    35. J. Paul Dunne & Nan Tian, 2015. "Military Expenditure, Economic Growth and Heterogeneity," Defence and Peace Economics, Taylor & Francis Journals, vol. 26(1), pages 15-31, February.
    36. Sandler, Todd & Forbes, John F, 1980. "Burden Sharing, Strategy, and the Design of NATO," Economic Inquiry, Western Economic Association International, vol. 18(3), pages 425-444, July.
    37. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    38. Borensztein, E. & De Gregorio, J. & Lee, J-W., 1998. "How does foreign direct investment affect economic growth?1," Journal of International Economics, Elsevier, vol. 45(1), pages 115-135, June.
    39. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tasleem Araf Cash & Jainendra Kumar Verma & Mohammad Athar Khaki, 2025. "Defence expenditure and economic growth in India: a revisit," SN Business & Economics, Springer, vol. 5(11), pages 1-26, November.
    2. Han, Lin & Ning, Depeng & Xin, Shiguan, 2026. "Geopolitical risk and economic growth: Evidence from ASEAN countries," Finance Research Letters, Elsevier, vol. 88(C).
    3. Evans O. N. D. Ocansey, PhD, 2025. "Financial Inclusion and Remittance Inflows on Human Development in Sub-Saharan Africa," International Journal of Finance, CARI Journals Limited, vol. 10(7), pages 94-117.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ngounou, Borice Augustin, 2026. "Does military spending kill inclusive growth in Africa? The role of institutions," International Economics, Elsevier, vol. 185(C).
    2. Serhan Cevik & John Ricco, 2018. "No buck for the bang: revisiting the military-growth nexus," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(4), pages 639-653, November.
    3. Alessandra Cepparulo & Luisa Giuriato & Paolo Pasimeni, 2025. "Defence Spending in the European Union: Evolution and Perspectives," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 67(4), pages 918-948, December.
    4. Tasleem Araf Cash & Jainendra Kumar Verma & Mohammad Athar Khaki, 2025. "Defence expenditure and economic growth in India: a revisit," SN Business & Economics, Springer, vol. 5(11), pages 1-26, November.
    5. Prakhar Pandey & Vishal Sharma & Rajnish Pande & Pushp Kumar & Vinay Joshi Chandniwala, 2026. "Is fiscal deficit stimulus or constraint for economic growth in India? Empirical evidence using asymmetric and thresholds approaches," Economic Change and Restructuring, Springer, vol. 59(4), pages 1-39, August.
    6. Hou Na & Chen Bo, 2014. "Military Spending and Economic Growth in An Augmented Solow Model: A Panel Data Investigation for OECD Countries," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 20(3), pages 395-409, August.
    7. Hanson Robert & Jeon Joo Young, 2024. "The Military Expenditure – Economic Growth Nexus Revisited: Evidence from the United Kingdom," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 30(2), pages 207-248.
    8. Syed Ali Raza & Maiyra Ahmed, 2025. "Threshold nonlinear relationship between defense spending and unemployment in different income level countries: evidence from panel smooth transition regression model," Quality & Quantity: International Journal of Methodology, Springer, vol. 59(2), pages 819-838, April.
    9. Yingying Xu & Hsu Ling Chang & Chi Wei Su & Adelina Dumitrescu, 2018. "Guns for Butter? Empirical Evidence from China," Defence and Peace Economics, Taylor & Francis Journals, vol. 29(7), pages 809-820, November.
    10. Limi Kouotou, Hibrahim & Atangana Ondoa, Henri, 2023. "Africa's natural resource curse: Does the arrival of new heads of state break the spell?," Resources Policy, Elsevier, vol. 81(C).
    11. Alessandra Cepparulo & Paolo Pasimeni, 2024. "Defence Spending in the European Union," European Economy - Discussion Papers 199, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    12. İbrahim Özmen & Mihai Mutascu, 2024. "Public Debt and Growth: New Insights," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8706-8736, June.
    13. Hans Pitlik & Michael Klien & Stefan Schiman-Vukan, 2017. "Stabilitätskonforme Berücksichtigung nachhaltiger öffentlicher Investitionen," WIFO Studies, WIFO, number 60595.
    14. Haytham Y.M. Ewaida, 2017. "The Impact of Sovereign Debt on Growth: An Empirical Study on GIIPS versus JUUSD Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 607-633.
    15. E. Desli & A. Gkoulgkoutsika, 2021. "Military spending and economic growth: a panel data investigation," Economic Change and Restructuring, Springer, vol. 54(3), pages 781-806, August.
    16. Elvis Dze Achuo & Tii N. Nchofoung & Simplice A. Asongu & Gildas Dohba Dinga, 2021. "Unravelling the Mysteries of Underdevelopment in Africa," Research Africa Network Working Papers 21/073, Research Africa Network (RAN).
    17. Yoshimichi Murakami & Nobuaki Hamaguchi, 2021. "Peripherality, income inequality, and economic development in Latin American countries," Oxford Development Studies, Taylor & Francis Journals, vol. 49(2), pages 133-148, April.
    18. Dimitrios Karamanis, 2022. "Defence partnerships, military expenditure, investment, and economic growth: an analysis in PESCO countries," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 173, Hellenic Observatory, LSE.
    19. P. B. Zondi & Z. Robinson, 2021. "The Relationship between Government Debt and Economic Growth in South Africa with Specific Reference to Eskom," EuroEconomica, Danubius University of Galati, issue 2(40), pages 17-34, November.
    20. Talknice Saungweme & Nicholas M. Odhiambo, 2019. "Does Public Debt Impact Economic Growth in Zambia? An Ardl-Bounds Testing Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 69(4), pages 53-73, October-D.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:ijoeps:v:19:y:2025:i:2:d:10.1007_s42495-025-00151-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.