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Capital centralization, protectionism and increasing military expenditures: A SVAR/BVAR analysis

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  • Giulia Chiara
  • Stefano Lucarelli

Abstract

This paper formalizes and empirically tests the causal transmission mechanism linking international capital centralization, macro-financial imbalances, protectionism, and systemic military escalation. We challenge the orthodox view of globalization as a self-stabilizing framework for peace, conceptualizing contemporary geoeconomic fragmentation through a theoretical framework stemming from the debate on global imbalances and the analytical revival of the Marxian tendential law of capital centralization. Integrating Structural Vector Autoregression (SVAR) and Bayesian Vector Autoregression (BVAR) models on historical time-series data (1998–2024), we estimate the dynamic interactions between net control, net international investment positions, a protectionism index, and military expenditure metrics across both a bilateral U.S.-China framework and an aggregated creditor-debtor group model. The empirical results confirm a statistically significant multi-stage causal sequence: an increase in capital centralization widens gaps in net international investment positions, prompting debtors to deploy protectionist measures to mitigate further capital centralization. Conversely, these protectionist shocks induce persistent, long-term positive impacts on the military expenditure of creditor states. Econometric evidence demonstrates that trade conflicts and rearmament are endogenous structural symptoms of the systemic motion of capital rather than exogenous diplomatic failures.

Suggested Citation

  • Giulia Chiara & Stefano Lucarelli, 2026. "Capital centralization, protectionism and increasing military expenditures: A SVAR/BVAR analysis," STOREPapers 1_2026, Associazione Italiana per la Storia dell'Economia Politica - StorEP.
    • Handle: RePEc:hpo:wpaper:1_2026
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    References listed on IDEAS

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    1. Olivier Blanchard & Emiliano Brancaccio, 2019. "Crisis and Revolution in Economic Theory and Policy: A Debate," Review of Political Economy, Taylor & Francis Journals, vol. 31(2), pages 271-287, April.
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    Keywords

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    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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