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Asymmetric causality between military expenditures and economic growth in top six defense spenders

Author

Listed:
  • Abdulnasser Hatemi-J

    (UAE University)

  • Tsangyao Chang

    (Feng Chia University)

  • Wen-Yi Chen

    (National Taichung University of Science and Technology)

  • Feng-Li Lin

    (Chaoyang University of Technology)

  • Rangan Gupta

    (University of Pretoria)

Abstract

This study applies asymmetric causality tests, proposed by Hatemi-J (Asymmetric panel causality tests with an application to the impact of fiscal policy on economic performance in Scandinavia, 2011; Empir Econ 43(1):447–456, 2012), to revisit military expenditures-growth nexus for the world top six defense spenders during the period of 1988–2013. Empirical results indicate that the military expenditure-led hypothesis is supported in China and Japan. However, the growth-led hypothesis is supported in four countries, i.e. France, Russia, Saudi Arabia and US. Except for Saudi Arabia, strong economic growth by no means implies automatic expansion of military expenditures. Defense planning in these countries is a matter of matching their limited resources to attain the suitable priorities. The more threats they perceive, the more spend for defense. This evidence provides useful insight into the behavior of other potential defense suppliers.

Suggested Citation

  • Abdulnasser Hatemi-J & Tsangyao Chang & Wen-Yi Chen & Feng-Li Lin & Rangan Gupta, 2018. "Asymmetric causality between military expenditures and economic growth in top six defense spenders," Quality & Quantity: International Journal of Methodology, Springer, vol. 52(3), pages 1193-1207, May.
    • Handle: RePEc:spr:qualqt:v:52:y:2018:i:3:d:10.1007_s11135-017-0512-9
    DOI: 10.1007/s11135-017-0512-9
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    Cited by:

    1. Hatemi-J, Abdulnasser, 2020. "Asymmetric Panel Causality Tests with an Application to the Impact of Fiscal Policy on Economic Performance in Scandinavia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 389-404.
    2. Soon, Siew-Voon & Baharumshah, Ahmad Zubaidi, 2021. "Exchange rates and fundamentals: Further evidence based on asymmetric causality test," International Economics, Elsevier, vol. 165(C), pages 67-84.
    3. Dakpogan, Arnaud & Smit, Eon, 2018. "Effect of negative shocks to electricity consumption on negative shocks to economic growth in Benin," MPRA Paper 89539, University Library of Munich, Germany.
    4. Masako Ikegami & Zijian Wang, 2023. "Does military expenditure crowd out health-care spending? Cross-country empirics," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(2), pages 1657-1672, April.
    5. repec:agr:journl:v:1(618):y:2019:i:1(618):p:169-182 is not listed on IDEAS
    6. çenberci, engin, 2020. "The Nexus Between Defense Spending and Growth: Empirical Analysis of First Euro Users," MPRA Paper 111273, University Library of Munich, Germany.
    7. Gunay, Samet, 2020. "Seeking causality between liquidity risk and credit risk: TED-OIS spreads and CDS indexes," Research in International Business and Finance, Elsevier, vol. 52(C).
    8. Wen-Min Lu & Qian Long Kweh & Kang-Fu Chen, 2021. "How do peace dividends bring about human development and productivity?," Annals of Operations Research, Springer, vol. 306(1), pages 435-452, November.
    9. Qurat Ul AIN & Syed Imran RAIS & Syed Tahir Hussain SHAH & Khalid ZAMAN & Shakira EJAZ & Abdul MANSOOR, 2019. "Empirically testing Keynesian defense burden hypothesis, nonlinear hypothesis, and spillover hypothesis: Evidence from Asian countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(618), S), pages 169-182, Spring.
    10. Abdul Rehman & Hengyun Ma & Rafael Alvarado & Fayyaz Ahmad, 2023. "The nexus of military, final consumption expenditures, total reserves, and economic development of Pakistan," Economic Change and Restructuring, Springer, vol. 56(3), pages 1753-1776, June.
    11. Veli Yilanci & Onder Ozgur & Muhammed Sehid Gorus, 2021. "Stock prices and economic activity nexus in OECD countries: new evidence from an asymmetric panel Granger causality test in the frequency domain," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-22, December.
    12. Michael A. Akume & Gylych Jelilov & Benedict Akanegbu, 2019. "The Impact of Military Spending on Economic Wellbeing in Nigeria," International Journal of Business, Economics and Management, Conscientia Beam, vol. 6(4), pages 186-200.

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    More about this item

    Keywords

    Growth; Military expenditures; Asymmetric panel causality;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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