Military Spending Research Paper

Military Spending Research Paper-73
This kind of attention has got more attention when different researchers obtained different result, for example (Smith and Smith 1980) argued that military expenditure protects countries from external threats and encourages foreign investment.By contrast, (Deger and Smith 1983) argued on negative effect on economic growth since it transfers resources from the civilian to the defense sector.So the aim of this study is to justify the relationship between military expenditure and economic growth for three neighbor countries that have to maintain a great amount of military budget as they are geographically correlated with one another.

This kind of attention has got more attention when different researchers obtained different result, for example (Smith and Smith 1980) argued that military expenditure protects countries from external threats and encourages foreign investment.

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Obtained results are robust and passed necessary diagnostic tests significantly.

Over the past decades the study of relationship between military expenditure and GDP growth has received extensive amount of attention of the researchers and policy makers around the world.

The other group of researchers got negative growth effect of military expenditure through different aspects such as higher budget deficit, higher public debt, higher rate of tax, lower capital formation, investment, and productivity of private sector, lower saving rate, decrease the spending of education, health, research and development. 1984; Lim 1983; Ram 1995; Dunne and Vougas 1999; Gupta et al. 2002) all of the studies obtained the negative growth effect of military expenditure.

Additionally, some other research also concluded that there is no sufficient relationship between military expenditure and economic growth, some of them are (Adams et al. According to them military expenditure does not have any significant impact on the economic growth as the spillover effect being highlighted by the proponents of the military spending is indistinct.

The authors (Khalid and Mustapha 2014) got positive relationship for India using ARDL model and ganger causality test, they found that 1% increase in military expenditure increases real GDP by 0.04% in short run but in long run the correlations are inconclusive.

Chen (1993) conducted an empirical econometric analysis based on a Barro-style growth model for china, his findings support the existence of a single long-run equilibrium relationship between the variables.Their study obtained a strong, positive unidirectional causality running from military expenditures to economic growth. (2005) examined the effect of military spending on economic growth in a panel of Middle Eastern countries and Turkey.Their study employed a dynamic panel data (1989–1999) estimation method and found positive growth effects of military expenditure.Firstly, we tested the unit root of our variables using ADF test (Augmented Dickey Fuller).Secondly, to investigate the long-run relationship between GDP growth and military expenditure we used Engle-Ganger Cointegration test.Collected data ranges for India (1980–2017), for Pakistan (1989–2017), and for China (1989–2017).Study conducted econometrical analysis to investigate the relationship between GDP growth and military expenditure for the three lions of south asia, India, Pakistan, and China.Atesoglu (2002) also used a Cointegration analysis for united states and gained positive and quantitative effect of military expenditure on economic growth. 2004b) examined the relationship between military expenditure and economic growth applying causality approach and acquired bi-directional causality between military spending and growth from 1964 to 1999. 2004a) observed the relationship between military spending and economic growth among EU 15 countries using Cointegration analysis and causality test for the period of 1961–2000, almost all cases they got positive causality from economic growth to military spending and not vice-versa.They also concluded that the EU countries decide the military expenditure considering their economic status.To justify the relationship of military expenditure and economic growth for 65 countries from 1975 to 2004 (Dicle and Dicle 2010) run the causality approach and finally they obtained bidirectional positive causality between the variables in 54 of the 65 countries. 2001) proved that in 23 countries there is a unidirectional causality from military expenditure to economic growth or vice versa and bidirectional causality in 7 countries.Abu-qarn (2010) in 2010 studied the Arab Arab-Israel conflict but he did not find any persistent adverse impact of military expenditures on economic growth. (2011) investigated the relationship of the military spending-growth for the case of North Cyprus from 1977 to 2007.

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