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Can We Declare Military Keynesianism Dead?

  • Luca Pieroni

    ()

    (University of Perugia and UWE, Bristol)

  • Giorgio d'Agostino

    (University of Perugia.)

  • Marco Lorusso

    (University of Verona.)

This paper empirically tests the Keynesian hypothesis that government defence spending positively impacts on aggregate output, by using a long run equilibrium model for the US and the UK. Our contribution, with respect to previous works, is twofold. First, our inferences are adjusted for structural breaks exhibited by the data concerning fiscal and monetary variables. Second, we take into account different dynamics between defence spending on aggregate output, showing that the results are sensitive to sub-sample choices. Though the estimated elasticities in both countries show a lack of significance in the more recent years of the sample, defence spending priorities addressed to international security may revitalize pro-cyclical effects in the UK, by an industrial policy of defence shared with the EU members.

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File URL: http://carecon.org.uk/DPs/0804.pdf
File Function: First version, 2008
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Paper provided by Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol in its series Working Papers with number 0804.

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Length: 24 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:uwe:wpaper:0804
Contact details of provider: Postal: 0117 328 3610
Phone: 0117 328 3610
Web page: http://www1.uwe.ac.uk/bl/research/bristoleconomics.aspx

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