Military Spending and Economic Growth in Greece, Portugal and Spain

Analysing the relationship between military spending and growth has been an important area of empirical research. Early studies focussed on large cross sections of countries, but criticisms of these led to a focus on case studies of individual countries and studies of groups of relatively homogeneous countries. Granger causality methods have also become common techniques for such analyses, both as single equation analyses and more recently, within a cointegrating VAR framework. This paper does two things. First it provides an empirical analysis of three of the EU’s poorest, peripheral economies, namely Greece, Portugal and Spain. It also considers the range of available Granger causality techniques and compares their results. It finds that the results differ across the methods used, indicating the problems with earlier studies, and across the countries, indicating the problems of drawing inferences across even relatively homogeneous economies.