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The Vicious Cycle of the Foreign Military Debt

  • Stavrinos, Vasilios G.
  • Zombanakis, George A.

This paper aims at estimating first the effects of defense spending on the main determinants of growth, and second the extent to and the channels through which the military debt of Greece influences the overall debt burden of the country, and consequently the critical determinants of economic growth and development. Increased imports of sophisticated weapons and military equipment can be financed at the cost of investment (guns v. ploughshares), or/and at the cost of human capital formation (guns v. butter and chalk), or at the cost of increasing the foreign debt of the country. It is this last case which is investigated in this paper. Our empirical results indicate that whatever the necessity and the benefits of the security aspect of defense, its economic costs are quite substantial. The military as a claimant of resources has a negative and non trivial effect on physical capital accumulation, and human capital formation. Moreover, financing increased military imports through borrowing from abroad has a negative and significant effect on the determinants of growth and development.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17758.

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Date of creation: 02 Mar 1998
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Publication status: Published in European Research Studies 1.1(1998): pp. 5-26
Handle: RePEc:pra:mprapa:17758
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  1. Ã…dne Cappelen & Nils Petter Gleditsch & Olav Bjerkholt, 1984. "Military Spending and Economic Growth in the OECD Countries," Journal of Peace Research, Peace Research Institute Oslo, vol. 21(4), pages 361-373, December.
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