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A non-linear defence-growth nexus? evidence from the US economy

  • Jes�s Crespo Cuaresma
  • Gerhard Reitschuler

The defense-growth nexus is investigated empirically using time series data for the US and allowing the effect of defense spending on growth to be non-linear. Using recently developed econometric methods involving threshold regressions, evidence of a level-dependent effect of military expenditure on GDP growth is found: the positive externality effect of defense spending prevails for relatively lower levels of defense spending (with respect to the history of defense spending in the US) and reverts its influence for higher levels.

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File URL: http://hdl.handle.net/10.1080/1024269042000164504
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Article provided by Taylor & Francis Journals in its journal Defence and Peace Economics.

Volume (Year): 15 (2004)
Issue (Month): 1 (February)
Pages: 71-82

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Handle: RePEc:taf:defpea:v:15:y:2004:i:1:p:71-82
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  1. Paul Dunne & Duncan Watson, 2000. "Military expenditure and employment in South Africa," Defence and Peace Economics, Taylor & Francis Journals, vol. 11(4), pages 587-596.
  2. Shieh, Jhy-yuan & Lai, Ching-chong & Chang, Wen-ya, 2002. "The impact of military burden on long-run growth and welfare," Journal of Development Economics, Elsevier, vol. 68(2), pages 443-454, August.
  3. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  4. Joshua Aizenman & Reuven Glick, 2003. "Military expenditure, threats, and growth," Working Paper Series 2003-08, Federal Reserve Bank of San Francisco.
  5. Bruce E. Hansen, 1996. "Sample Splitting and Threshold Estimation," Boston College Working Papers in Economics 319., Boston College Department of Economics, revised 12 May 1998.
  6. Michael D. Stroup & Jac C. Heckelman, 2001. "Size Of The Military Sector And Economic Growth: A Panel Data Analysis Of Africa And Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 329-360, November.
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