The Defense-Growth Nexus: An Application for the Israeli-Arab Conflict

Aamer Abu-Qarn ()

No 1003, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: This paper revisits the defence-growth nexus for the rivals of the Israeli-Arab conflict over the last four decades. To this end, we utilize the Toda and Yamamoto (1995) causality test and the generalized variance decomposition. Contrary to the conventional wisdom and many earlier studies, we fail to detect any persistent adverse impact of military expenditures on economic growth. Our conclusions are kept intact even when we account for the possibility of endogenous structural breaks and during the post-1979 peace treaty period. Our findings imply insignificant peace dividends once the conflict is resolved and the military spending is cut to internationally acceptable standards.

Keywords: Growth; Middle East; Israeli-Arab conflict; Causality; Generalized Forecast Error Variance Decomposition (search for similar items in EconPapers)
JEL-codes: H56 O53 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2010
New Economics Papers: this item is included in nep-ara and nep-fdg
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Forthcoming in Defence and Peace Economics

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http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1003.pdf First version, 2010 (application/pdf)

Related works:
Working Paper: The Defense-growth nexus: An application for the Israeli-Arab conflict (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:1003

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