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Defense spending and economic growth across the Taiwan straits: a threshold regression model

  • Chung-Nang Lai
  • Bwo-Nung Huang
  • Chin-Wei Yang
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    This paper employs both linear and non-linear models to investigate the relationship between national defense spending and economic growth for Taiwan and China. Using data from 1953-2000 on defense spending, GDP, import, export and capital, we find that China's defense spending leads that of Taiwan. There exists the phenomenon of an arms race between both countries when official Chinese data are used. On the one hand, feedback relations prevail between economic growth and defense spending growth in Taiwan. On the other hand, China's national defense is found to lead economic growth.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/1024269052000323542
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    Article provided by Taylor & Francis Journals in its journal Defence and Peace Economics.

    Volume (Year): 16 (2005)
    Issue (Month): 1 ()
    Pages: 45-57

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    Handle: RePEc:taf:defpea:v:16:y:2005:i:1:p:45-57
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    1. LaCivita, Charles J. & Frederiksen, Peter C., 1991. "Defense spending and economic growth An alternative approach to the causality issue," Journal of Development Economics, Elsevier, vol. 35(1), pages 117-126, January.
    2. Weise, Charles L, 1999. "The Asymmetric Effects of Monetary Policy: A Nonlinear Vector Autoregression Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(1), pages 85-108, February.
    3. Dakurah, A. Henry & Davies, Stephen P. & Sampath, Rajan K., 2001. "Defense spending and economic growth in developing countries: A causality analysis," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 651-658, August.
    4. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
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