THE MILITARY EXPENDITURE-EXTERNAL DEBT NEXUS: NEW EVIDENCE FROM A PANEL OF MIDDLE EASTERN COUNTRIES

Paresh Narayan () and Russell Smyth

No 17-07, Monash Economics Working Papers from Monash University, Department of Economics

Abstract: This paper examines the impact of military expenditure and income on external debt for a panel of six Middle Eastern countries; namely, Oman, Syria, Yemen, Bahrain, Iran, and Jordan, over the period 1988 to 2002. Using Pedroni's (2004) test for panel cointegration, we find that there is a long-run relationship between external debt, military expenditure and income. The estimated long-run elasticities suggest that an increase in military expenditure contributes to a rise in external debt, while an increase in income helps the Middle Eastern countries to pay off their external debt.

Pages: 28 pages
Date: 2007
New Economics Papers: this item is included in nep-ara and nep-cwa
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