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Does Military Spending Explode External Debt in Pakistan?


  • Shahbaz, Muhammad
  • Shabbir, Shahbaz Muhammad
  • Butt, Muhammad Sabihuddin


This paper explores the effect of military expenditures on external debt in case of Pakistan over the period of 1973-2009. For this purpose, ARDL bounds testing approach is used to examine cointegration between the variables. ADF, P-P and ADF-GLS, Clemente et al. (1998) unit root tests are applied to check the order of integration of variables. OLS and ECM regressions approaches are employed to investigate marginal impact of military spending on external debt in long and short run. Our findings indicate cointegration which confirms long run relationship between military expenditures, external debt, economic growth and investment. The results reveal that a rise in military expenditures increases the stock of external debt. The inverse effect of economic growth on external debt is found and an increase in investment is also increasing external debt in the country. This study invites policy makers to approach the problem of curtailing external debt in innovative ways in case of Pakistan.

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  • Shahbaz, Muhammad & Shabbir, Shahbaz Muhammad & Butt, Muhammad Sabihuddin, 2011. "Does Military Spending Explode External Debt in Pakistan?," MPRA Paper 30429, University Library of Munich, Germany, revised 21 Apr 2011.
  • Handle: RePEc:pra:mprapa:30429

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    Cited by:

    1. Eftychia Nikolaidou, 2016. "The role of military expenditure and arms imports in the Greek debt crisis," Economics of Peace and Security Journal, EPS Publishing, vol. 11(1), pages 18-27, April.
    2. Serkan Künü & Sertaç Hopoðlu & Gürkan Bozma, 2016. "Conflict, Defense Spending and Economic Growth in the Middle East: A Panel Data Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 80-86.

    More about this item


    Military Spending; External Debt; Cointegration;

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General

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