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Military spending and economic growth: the case of Iran

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  • Farzanegan, Mohammad Reza

Abstract

Iranian government budget on military over the last decade has been higher than the average of the world. The current increasing international sanctions aim to reduce the military capabilities and capacities of the Iranian government. In this study, we analyze the response of the Iranian economy to shocks in its military budget from 1959-2007, using Impulse Response Functions (IRF) and Variance Decomposition Analysis (VDA) techniques. The Granger causality results show that there is unidirectional causality from military spending to the economic growth. The response of income growth to increasing shocks in the military budget is positive and statistically significant.

Suggested Citation

  • Farzanegan, Mohammad Reza, 2011. "Military spending and economic growth: the case of Iran," MPRA Paper 35498, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35498
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    More about this item

    Keywords

    Military spending; Economic growth; VAR model; Impulse Response; Sanctions; Iran;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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