Empirically testing Keynesian defense burden hypothesis, nonlinear hypothesis, and spillover hypothesis: Evidence from Asian countries

Qurat Ul Ain, Syed Imran Rais, Syed Tahir Hussain Shah, Khalid Zaman, Shakira Ejaz and Abdul Mansoor
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Qurat Ul Ain: University of Wah, Wah Cantt, Pakistan
Syed Imran Rais: University of Wah, Wah Cantt, Pakistan
Syed Tahir Hussain Shah: University of Wah, Wah Cantt, Pakistan
Khalid Zaman: University of Wah, Wah Cantt, Pakistan
Shakira Ejaz: University of Wah, Wah Cantt, Pakistan
Abdul Mansoor: University of Wah, Wah Cantt, Pakistan

Theoretical and Applied Economics, 2019, vol. XXVI, issue 1(618), Spring, 169-182

Abstract: The objective of the study is to evaluate different alternative and plausible hypothesis, i.e., Keynesian defense burden hypothesis, nonlinear hypothesis, and spillover hypothesis by controlling governance indicators in a panel of 5 Asian selected countries during a period of 2000 to 2016. The study employed panel Fully Modified OLS (FMOLS) and Dumitrescu-Hurlin panel causality estimates for robust inferences. The results confirmed the defense burden hypothesis where high military expenditures decrease country’s economic growth. The real interest rate, trade openness, and government education expenditures substantially decreases country’s per capita income due to market imperfection, arms import, and low spending on education. The political instability decreases economic growth while voice and accountability and regulatory control largely support country’s economic growth. The causality estimates confirmed the feedback relationship between i) per capita income and exports ii) trade openness and military expenditures, and iii) real interest rate and exports, while growth led military expenditures and arms conflict, military led exports and political instability, and trade led regulatory control established in causality framework.

Keywords: military expenditures; economic growth; political instability; regulatory control; voice and accountability; FMOLS; Asian countries. (search for similar items in EconPapers)
Date: 2019
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