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Asymmetric Granger Causality between Military Expenditures and Economic Growth in Top Six Defense Suppliers

Author

Listed:
  • Abdulnasser Hatemi-J

    (Department of Economics and Finance, UAE University, P.O. Box 15551, Al Ain, UAE)

  • Tsangyao Chang

    (Department of Finance, Feng Chia University, Taichung, TAIWAN)

  • Wen-Yi Chen

    (Department of Senior Citizen Service Management, College of Health, National Taichung University of Science and Technology, Taichung, TAIWAN)

  • Feng-Li Lin

    (Department of Accounting, Chaoyang University of Technology, Taichung, TAIWAN)

  • Rangan Gupta

    (Department of Economics, University of Pretoria)

Abstract

This study applies asymmetric Granger causality test, proposed by Hatemi-J (2011; 2012) to revisit military expenditures-growth nexus for the world top 6 defense suppliers over 1988-2013. Empirical results indicate that the military expenditure-led hypothesis is supported in China and Japan. However, the growth-led hypothesis is supported in four countries, i.e. France, Russia, Saudi Arabia and US. Except for Saudi Arabia, strong economic growth by no means implies automatic expansion of military expenditures. Defense planning in these two countries is a matter of matching their limited resources to attain the suitable priorities. The more threats they perceived, the more military spends. This evidence provides useful insight into the behavior of other potential defense suppliers.

Suggested Citation

  • Abdulnasser Hatemi-J & Tsangyao Chang & Wen-Yi Chen & Feng-Li Lin & Rangan Gupta, 2015. "Asymmetric Granger Causality between Military Expenditures and Economic Growth in Top Six Defense Suppliers," Working Papers 201565, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201565
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    References listed on IDEAS

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    2. H. Naci Mocan & Turan G. Bali, 2010. "Asymmetric Crime Cycles," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 899-911, November.
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    4. Masoud Ali Khalid & Alhaji Bukar Mustapha, 2014. "Long-Run Relationships and Causality Tests Between Military Expenditure and Economic Growth in India," The Economics and Finance Letters, Conscientia Beam, vol. 1(4), pages 49-58.
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    Cited by:

    1. Gunay, Samet, 2020. "Seeking causality between liquidity risk and credit risk: TED-OIS spreads and CDS indexes," Research in International Business and Finance, Elsevier, vol. 52(C).

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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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