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"Guns or Butter?" Revisited: Robustness and Nonlinearity Issues in the Defense-Grotwth Nexus

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Abstract

The relationship between military expenditure and growth is studied taking into account potential nonlinearities and robustness issues in the specification of the econometric models used. Using cross-country growth regressions and the widely used Feder-Ram model, the partial correlation between defense and economic growth appears robust and significantly negative only for countries with a relatively low military expenditure ratio. While the externality effect appears positive in this subgroup of countries, the overall effect turns negative due to the size effect of the military sector.

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  • Jesús Crespo Guaresma & Gerhard Reitschuler, 2003. ""Guns or Butter?" Revisited: Robustness and Nonlinearity Issues in the Defense-Grotwth Nexus," Vienna Economics Papers vie0310, University of Vienna, Department of Economics.
  • Handle: RePEc:vie:viennp:vie0310
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    4. Julien Malizard, 2014. "Dépenses militaires et croissance économique dans un contexte non linéaire. Le cas français," Revue économique, Presses de Sciences-Po, vol. 65(3), pages 601-618.
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    9. Goodness C. Aye & Mehmet Balcilar & John P. Dunne & Rangan Gupta & Rene� van Eyden, 2014. "Military expenditure, economic growth and structural instability: a case study of South Africa," Defence and Peace Economics, Taylor & Francis Journals, vol. 25(6), pages 619-633, December.
    10. Obreja Brasoveanu, Laura, 2010. "The Impact of Defense Expenditure on Economic Growth," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 148-167, December.
    11. María Ruiz Diaz, John Galeano Raquejo, Edwin Gil Mateus, 2016. "Posconflicto colombiano y sus efectos económicos," Revista CIFE, Universidad Santo Tomás, March.
    12. Shreesh Chary, 2023. "The nexus between arms imports, military expenditures and economic growth of the top arms importers in the world: a pooled mean group approach," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(4), pages 808-822, August.
    13. Tiwari, Aviral & Shahbaz, Muhammad, 2011. "Does Defence Spending Stimulate Economic Growth in India?," MPRA Paper 30880, University Library of Munich, Germany, revised 18 Apr 2011.
    14. Sefa Awaworyi Churchill & Siew Ling Yew, 2018. "The effect of military expenditure on growth: an empirical synthesis," Empirical Economics, Springer, vol. 55(3), pages 1357-1387, November.
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    18. Chad R. Wilkerson & Megan D. Williams, 2008. "How is the rise in national defense spending affecting the Tenth District economy?," Economic Review, Federal Reserve Bank of Kansas City, vol. 93(Q II), pages 49-79.
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    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • 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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