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Arms Race And Economic Growth: The Case Of India And Pakistan

  • Julide Yildirim
  • Nadir Ocal

The hostility between India and Pakistan is believed to have led to an arms race between the two countries, which might have contributed to their retarded economic growth. This paper investigates this twin problem of arms race and economic growth for the time period 1949-2003. The empirical results suggest that there is a mutual causal relationship between the military expenditures of India and Pakistan. Even though military expenditure does not Granger cause economic growth in Pakistan, there is causality from military expenditure to economic growth in India. A VAR analysis revealed that military expenditure hinders economic growth in India in the long-run, but it has a growth promoting effect in the short-run.

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Article provided by Taylor & Francis Journals in its journal Defence and Peace Economics.

Volume (Year): 17 (2006)
Issue (Month): 1 ()
Pages: 37-45

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Handle: RePEc:taf:defpea:v:17:y:2006:i:1:p:37-45
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  1. Selami Sezgin & Julide Yildirim, 2002. "The Demand for Turkish Defence Expenditure," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(2), pages 121-128.
  2. Christos Kollias & Suzanna-Maria Paleologou, 2003. "Domestic political and external security determinants of the demand for greek military expenditure," Defence and Peace Economics, Taylor & Francis Journals, vol. 14(6), pages 437-445.
  3. Biswas, Basudeb & Ram, Rati, 1986. "Military Expenditures and Economic Growth in Less Developed Countries: An Augmented Model and Further Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 34(2), pages 361-72, January.
  4. Seiglie, Carlos & Liu, Peter C., 2002. "Arms races in the developing world: some policy implications," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 693-705, November.
  5. Daniel P. Hewitt, 1991. "Military Expenditure; Econometric Testing of Economic and Political Influences," IMF Working Papers 91/53, International Monetary Fund.
  6. Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
  7. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  8. Zapata, Hector O. & Rambaldi, Alicia N., 1996. "Monte Carlo Evidence On Cointegration And Causation," Staff Papers 31690, Louisiana State University, Department of Agricultural Economics and Agribusiness.
  9. 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.
  10. repec:cup:cbooks:9780521447287 is not listed on IDEAS
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