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Does Military Expenditure Matter For Inflation And Economic Growth?

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  • Shin-Jen Tzeng
  • Ching-Chong Lai
  • Chun-Chieh Huang

Abstract

This paper sets up a monetary endogenous growth model, and uses it to explain the ambiguous linkage between the military burden and the inflation rate observed in existing empirical studies. It is found that an expansion in the military burden has an ambiguous effect on the inflation rate depending upon the relative extent of two conflicting forces. More specifically, if the increase in the marginal benefit from holding money exceeds (falls short of) the increase in the marginal product of private capital, the inflation rate will rise (fall) in response. Moreover, it is found that an increase in the military burden will stimulate the balanced growth rate, confirming Benoit's famous empirical findings.

Suggested Citation

  • Shin-Jen Tzeng & Ching-Chong Lai & Chun-Chieh Huang, 2008. "Does Military Expenditure Matter For Inflation And Economic Growth?," Defence and Peace Economics, Taylor & Francis Journals, vol. 19(6), pages 471-478.
    • Handle: RePEc:taf:defpea:v:19:y:2008:i:6:p:471-478
    DOI: 10.1080/14775080701606184
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    References listed on IDEAS

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    Cited by:

    1. Hung-Pin Lin, 2012. "Does Defense Spending Surprise Long-Run Inflation, Economic Growth and Welfare?," Economics Bulletin, AccessEcon, vol. 32(1), pages 1020-1031.
    2. Lin Hung-Pin & Tsung-Li Wang & Cheng-Lang Yang, 2016. "Further Causality Evidence on Arms Race, Inflation and Economic Growth," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(2), pages 123-136.
    3. Salahodjaev, Raufhon, 2016. "Intelligence and defense spending: a cross-country evidence," MPRA Paper 70252, University Library of Munich, Germany.

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