You are here

The Nexus between Military Spending and Economic Growth in Newly Industrialized Countries: Panel Evidence from Cross-Sectional Dependency

Journal Name:

Publication Year:

DOI: 
https://doi.org/10.17015/ejbe.2016.017.03
Author NameUniversity of Author
Abstract (2. Language): 
In this study, the long term relationship between military spending and economic growth in newly industrialized countries is analyzed with panel data methods for the years of 1988-2013. The study, where panel unit root, panel co-integration, panel co-integration estimator and panel causality tests that allow cross-sectional dependence are used, shows that the feedback hypothesis is valid in newly industrialized countries. And when these countries are analyzed separately, it is seen that the growth hypothesis is valid for India, Malaysia, Mexico and South Africa; the neutrality hypothesis is valid for China, Indonesia, Philippines, Thailand and Turkey and the growth detriment hypothesis is valid for Brazil.
37
50

JEL Codes:

REFERENCES

References: 

Atesoglu, H.S. (2002). Defense spending promotes aggregate output in the United States –
Evidence from cointegration analysis. Defence and Peace Economics, 13(1), 55–60.
http://dx.doi.org/10.1080/10242690210963
Aye, G.C., Balcilar, M., Dunne, J.P.,Gupta & R., Eyden, R.V. (2014). Military expenditure,
economic growth and structural instability: a case study of South Africa. Defence and Peace
Economics, 25(6), 619-633. http://dx.doi.org/10.1080/10242694.2014.886432
Barro, R.J. (1990). Government spending in a simple model of endogenous growth. Journal
of Political Economy, 98(5), 103-125. http://dx.doi.org/10.1086/261726
Batchelor, P., Dunne, P. & Saal, D. (2000). Military spending and economic growth in South
Africa. Defence and Peace Economics, 11(6), 553–571.
http://dx.doi.org/10.1080/10430710008404966
Benoit, E. (1973). Defense and economic growth in developing countries. Boston: D.C. Heath
& Company.
Benoit, E. (1978). Growth and defense spending in developing countries. Economic
Development and Cultural Change, 34, 176-196.
Biswas, R. & Ram, R. (1986). Military expenditure and economic growth in LDC: An
augmented model and further evidence. Economic Development and Cultural Change, 34(2),
361–372. http://dx.doi.org/10.1086/451533
Breusch, T. & Pagan, A. (1980). The LM test and its application to model specification in
econometrics. Review of Economic Studies, 47(1), 239–253.
http://dx.doi.org/10.2307/2297111
Cappelen, A., Gleditsch, N.P. & Bjerkholt, O. (1984). Military spending and economic growth
in the OECD countries. Journal of Peace Research, 21(4), 361–373.
http://dx.doi.org/10.1177/002234338402100404
Chang, T., Lee, C. C., Hung, K & Lee, K, H. (2014). Does military spending really matter for
economic growth in China and G7 countries: The roles of dependency and heterogeneity.
Defence and Peace Economics, 1-15. http://dx.doi.org/10.1080/10242694.2013.763460
Chang, T., Lee, C.C & Chu, H.P. (2015). Revisiting the Defense–Growth nexus in European
countries. Defence and Peace Economics, 26(3), 341-356.
http://dx.doi.org/10.1080/10242694.2013.832556
The Nexus between Military Spending and Economic Growth in Newly Industrialized ...
EJBE 2016, 9 (17) Page |49
Chowdhury, A.R. (1991). A causal analysis of defence spending and economic growth.
Journal of Conflict Resolution, 35(1), 80–97.
http://dx.doi.org/10.1177/0022002791035001005
Cuaresma, J.C. & Reitschuler, G. (2003). A nonlinear defence-growth nexus? Evidence from
the US economy. Defence and Peace Economics, 15(1), 71–82.
http://dx.doi.org/10.1080/1024269042000164504
Deger, S. & Smith, R. (1983). Military expenditure and growth in less developed countries.
Journal of Conflict Resolution, 28(2), 335–353.
http://dx.doi.org/10.1177/0022002783027002006
Deger, S. (1986). Economic development and defense expenditure. Economic Development
and Cultural Change, 35(1), 179-196. http://dx.doi.org/10.1086/451577
Dumitrescu, E.I., & Hurlin, C. (2012). Testing for Granger non-causality in heterogeneous
panels. Economic Modelling, 29(4),1450-1460.
http://dx.doi.org/10.1016/j.econmod.2012.02.014
Dunne, P. & Vougas, D. (1999). Military spending and economic growth in South Africa.
Journal of Conflict Resolution, 43(4), 521–537.
http://dx.doi.org/10.1177/0022002799043004006
Dunne, P., Nikolaidou, E. & Vougas, D. (2001). Defence spending and economic growth: a
causal analysis for Greece and Turkey. Defence and Peace Economics, 12(1), 5–26.
http://dx.doi.org/10.1080/10430710108404974
Feridun, M., Sawhney, B. & Shahbaz, M. (2011). The impact of military spending on
economic growth: The case of north Cyprus. Defence and Peace Economics, 22(5), 555–562.
http://dx.doi.org/10.1080/10242694.2011.562370
Hadri, K., & Kurozumi, E. (2012). A simple panel stationarity tests in the presence of crosssectional
dependence. Economics Letters, 115(1), 31–34.
http://dx.doi.org/10.1016/j.econlet.2011.11.036
Karagol, E. & Palaz, S. (2004). Does defence expenditure deter economic growth in Turkey? A
cointegration analysis. Defence and Peace Economics, 15(3), 289–298.
http://dx.doi.org/10.1080/10242690320001608908
Karagol, E. (2006). The relationship between external debt, defence expenditures and GNP
revisited: the case of Turkey. Defence and Peace Economics, 17, 47-57.
http://dx.doi.org/10.1080/10242690500369199
Kollias, C., Naxakis, C., & Zaranga, L. (2004). Defence spending and growth in Cyprus: a causal
analysis. Defence and Peace Economics, 15, 299-207.
http://dx.doi.org/10.1080/1024269032000166864
Kollias, C., Manolas, G. & Paleologou, S.Z. (2004). Defence expenditure and economic growth
in the European Union: A causality analysis. Journal of Policy Modeling, 26(5), 553–569.
http://dx.doi.org/10.1016/j.jpolmod.2004.03.013
Kollias, C., Mylonidis, N. & Paleologou, S. (2007). A panel data analysis of the nexus between
defence spending and growth in the European Union. Defence and Peace Economics, 18(1),
75–85. http://dx.doi.org/10.1080/10242690600722636
Kollias, C., & Paleologou, S.M. (2013). Guns, highways and economic growth in the United
States. Economic Modelling, 30, 449-455. http://dx.doi.org/10.1016/j.econmod.2012.09.048
Mehmet Akif DESTEK
Page |50 EJBE 2016, 9 (17)
Lai, C.N., Huang, B.N. & Yang, C.W. (2005). Defense spending and economic growth across
the Taiwan Straits: A threshold regression model. Defence and Peace Economics, 16, 45–57.
http://dx.doi.org/10.1080/1024269052000323542
LaCivita, C.J. & Frederiksen, P.C. (1991). Defense spending and economic growth, an
alternative approach to the causality issue. Journal of Development Economics, 35(1), 117–
126. http://dx.doi.org/10.1016/0304-3878(91)90069-8
Lee, C.C. & Chen, S.T. (2007). Do defence expenditures spur GDP: A panel analysis from
OECD and non-OECD countries. Defence and Peace Economics, 18(3), 265–280.
http://dx.doi.org/10.1080/10242690500452706
McCoskey, S., & Kao, C. (1998). A residual-based test of the null of cointegration in panel
data. Econometric Reviews, 17(1), 57–84. http://dx.doi.org/10.1080/07474939808800403
Pesaran, M.H. (2004). General diagnostic tests for cross section dependence in panels.
(Cambridge Working Papers in Economics No. 0435), Faculty of Economics, University of
Cambridge.
Pesaran, M.H., (2006). Estimation and inference in large heterogenous panels with
multifactor error structure. Econometrica, Journal of the Econometric Society, 74, 967–1012.
http://dx.doi.org/10.1111/j.1468-0262.2006.00692.x
Pesaran, M.H., Ullah, A. & Yamagata, T. (2008). A bias-adjusted LM test of error cross-section
independence. Econometrics Journal, 11(1), 105–127. http://dx.doi.org/10.1111/j.1368-
423X.2007.00227.x
Pesaran, M.H. & Yamagata, T. (2008). Testing slope homogeneity in large panels. Journal of
Econometrics, 142(1), 50–93. http://dx.doi.org/10.1016/j.jeconom.2007.05.010
Pradhan, R. (2010). Modelling the nexus between defense spending and economic growth in
Asean-5: Evidence from cointegrated panel analysis. African Journal of Political Science and
International Relations, 4(8), 297–307.
Smith, R.(1980). Military expenditure and investment in OECD countries 1954–73. Journal of
Comparative Economics, 4, 19–32. http://dx.doi.org/10.1016/0147-5967(80)90050-5
Swamy, P.A.V.B. (1970). Efficient inference in a random coefficient regression model.
Econometrica, 38(2), 311–323. http://dx.doi.org/10.2307/1913012
Westerlund, J., & Edgerton, D. (2007). A panel bootstrap cointegration test. Economics
Letters, 97, 185–190. http://dx.doi.org/10.1016/j.econlet.2007.03.003
Yildirim, J., Sezgin, S., & Ocal, N. (2005). Military expenditure and economic growth in middle
eastern countries: A dynamic panel data analysis. Defence and Peace Economics, 16(4), 283-
295. http://dx.doi.org/10.1080/10242690500114751

Thank you for copying data from http://www.arastirmax.com