IDEAS home Printed from https://ideas.repec.org/a/taf/defpea/v30y2019i2p238-251.html
   My bibliography  Save this article

Armed Conflict, Military Expenses and FDI Inflow to Developing Countries

Author

Listed:
  • Nusrate Aziz
  • Usman Khalid

Abstract

This paper investigates the relationship between military expenditure and FDI inflow conditioning on the exposure of a country to armed conflict in the long run. We apply the band spectrum regression estimator, and the maximal overlap discrete wavelet transform, to a panel of 60 developing countries, for the years 1990 to 2013. The estimated results indicate that military expenditure, in the absence of armed conflict, reduces FDI inflow. However, the negative effect is mitigated by increased military expenditure, in the presence of armed conflict. We also show that the effect of military expenditure on FDI is time sensitive, in that it takes time for military expenditure to affect FDI inflow. FDI inflow in response to higher military expenditure is higher for the country that faces higher armed conflict than the country that faces lower armed conflict. The findings are robust in the case of overall as well as internal conflict. These results are also robust to the alternative specification, subsample analysis with different armed conflict thresholds, and the estimation using the time variant long-run models.

Suggested Citation

  • Nusrate Aziz & Usman Khalid, 2019. "Armed Conflict, Military Expenses and FDI Inflow to Developing Countries," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(2), pages 238-251, February.
    • Handle: RePEc:taf:defpea:v:30:y:2019:i:2:p:238-251
    DOI: 10.1080/10242694.2017.1388066
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/10242694.2017.1388066
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10242694.2017.1388066?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Walter Enders & Todd Sandler, 1996. "Terrorism and Foreign Direct Investment in Spain and Greece," Kyklos, Wiley Blackwell, vol. 49(3), pages 331-352, August.
    2. Sandler,Todd & Hartley,Keith, 1995. "The Economics of Defense," Cambridge Books, Cambridge University Press, number 9780521447287, Enero-Abr.
    3. Kurt W. Rothschild, 1973. "Military Expenditure, Exports And Growth," Kyklos, Wiley Blackwell, vol. 26(4), pages 804-814, November.
    4. Ram, Rati, 1995. "Defense expenditure and economic growth," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 10, pages 251-274, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pata, Ugur Korkut & Destek, Mehmet Akif & Manga, Muge & Cengiz, Orhan, 2022. "Militarization of NATO Countries Sparks Climate Change? Investigating the Moderating Role of Technological Progress and Financial Development," MPRA Paper 117567, University Library of Munich, Germany.
    2. Usman Khalid & Olivier Habimana, 2021. "Military Spending and Economic Growth in Turkey: A Wavelet Approach," Defence and Peace Economics, Taylor & Francis Journals, vol. 32(3), pages 362-376, April.
    3. Luke Emeka Okafor & Usman Khalid, 2021. "Regaining international tourism attractiveness after an armed conflict: the role of security spending," Current Issues in Tourism, Taylor & Francis Journals, vol. 24(3), pages 385-402, February.
    4. Ramazan ErdaÄŸ, 2021. "Security Environment and Military Spending of Turkey in the 2000s," Contemporary Review of the Middle East, , vol. 8(1), pages 120-139, March.
    5. Muhammad Athar Nadeem & Zhiying Liu & Yi Xu & Kishwar Nawaz & Muhammad Yousaf Malik & Amna Younis, 2020. "Impacts of terrorism, governance structure, military expenditures and infrastructures upon tourism: empirical evidence from an emerging economy," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 10(1), pages 185-206, March.
    6. Khalid Zaman, 2019. "Does higher military spending affect business regulatory and growth specific measures? Evidence from the group of seven (G-7) countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 323-348, April.
    7. Khalid, Usman & Shafiullah, Muhammad & Chaudhry, Sajid M., 2024. "Does conflict aggravate energy poverty?," Energy Policy, Elsevier, vol. 194(C).
    8. Usman Khalid & Luke Emeka Okafor & Nusrate Aziz, 2020. "Armed conflict, military expenditure and international tourism," Tourism Economics, , vol. 26(4), pages 555-577, June.
    9. Paula Gómez-Trueba Santamaría & Alfredo Arahuetes García & Tomás Curto González, 2021. "A tale of five stories: Defence spending and economic growth in NATO´s countries," PLOS ONE, Public Library of Science, vol. 16(1), pages 1-22, January.
    10. Sini, Snow & Abdul-Rahim, A.S. & Chin, Lee & Said, Rusmawati & Sulaiman, Chindo, 2022. "Natural resources’ impact on capital flow and conflict relationship in Africa: A novel insight from GMM and quantile regression," Resources Policy, Elsevier, vol. 78(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Llussá, Fernanda & Tavares, José, 2011. "Which terror at which cost? On the economic consequences of terrorist attacks," Economics Letters, Elsevier, vol. 110(1), pages 52-55, January.
    2. Chang, Hsin-Chen & Huang, Bwo-Nung & Yang, Chin Wei, 2011. "Military expenditure and economic growth across different groups: A dynamic panel Granger-causality approach," Economic Modelling, Elsevier, vol. 28(6), pages 2416-2423.
    3. Julien Malizard, 2014. "Dépenses militaires et croissance économique dans un contexte non linéaire. Le cas français," Revue économique, Presses de Sciences-Po, vol. 65(3), pages 601-618.
    4. Linda Andersson & Johan Lundberg & Magnus Sjostrom, 2007. "Regional Effects Of Military Base Closures: The Case Of Sweden," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(1), pages 87-97.
    5. Pavel Yakovlev, 2007. "Arms Trade, Military Spending, And Economic Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 18(4), pages 317-338.
    6. Stergios Skaperdas, 2011. "The costs of organized violence: a review of the evidence," Economics of Governance, Springer, vol. 12(1), pages 1-23, March.
    7. Julien Malizard, 2013. "Opportunity Cost Of Defense: An Evaluation In The Case Of France," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(3), pages 247-259, June.
    8. Walter Enders & Todd Sandler, 2000. "Is Transnational Terrorism Becoming More Threatening?," Journal of Conflict Resolution, Peace Science Society (International), vol. 44(3), pages 307-332, June.
    9. Alptekin, Aynur & Levine, Paul, 2012. "Military expenditure and economic growth: A meta-analysis," European Journal of Political Economy, Elsevier, vol. 28(4), pages 636-650.
    10. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2007. "Calculating Tragedy: Assessing The Costs Of Terrorism," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 1-24, February.
    11. Giorgio d’Agostino & John Paul Dunne & Luca Pieroni, 2019. "Military Expenditure, Endogeneity and Economic Growth," Defence and Peace Economics, Taylor & Francis Journals, vol. 30(5), pages 509-524, July.
    12. Reitschuler, Gerhard & Loening, Josef L., 2005. "Modeling the Defense-Growth Nexus in Guatemala," World Development, Elsevier, vol. 33(3), pages 513-526, March.
    13. Jurgen Brauer, 2002. "Survey and Review of the Defense Economics Literature on Greece and Turkey: What Have We Learned?," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(2), pages 85-107.
    14. Angus C. Chu & Ching-Chong Lai, 2012. "On the Growth and Welfare Effects of Defense R&D," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 14(3), pages 473-492, June.
    15. Joshua Aizenman & Reuven Glick, 2006. "Military expenditure, threats, and growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(2), pages 129-155.
    16. Wijeweera Albert & Webb Matthew J., 2010. "A Peace Dividend for Sri Lanka: The Case for a Return to Prosperity Following the End of Hostilities," Global Economy Journal, De Gruyter, vol. 10(2), pages 1-11, May.
    17. Mohaned Al-Hamdi & Mohammad Alawin, 2017. "The Relationship Between Military Expenditure and Economic Growth in Some Middle Eastern Countries: What Is the Story?," Asian Social Science, Canadian Center of Science and Education, vol. 13(1), pages 1-45, January.
    18. Jean-Yves Caro, 1998. "Croissance et dépenses de défense dans les pays de l'Asean," Revue Économique, Programme National Persée, vol. 49(1), pages 139-149.
    19. Tiwari, Aviral & Shahbaz, Muhammad, 2011. "Does Defence Spending Stimulate Economic Growth in India?," MPRA Paper 30880, University Library of Munich, Germany, revised 18 Apr 2011.
    20. Tilman Bruck, 2005. "An Economic Analysis Of Security Policies," Defence and Peace Economics, Taylor & Francis Journals, vol. 16(5), pages 375-389.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:defpea:v:30:y:2019:i:2:p:238-251. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/GDPE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.