Does Military Spending Explode External Debt in Pakistan?

Muhammad Shahbaz, Shahbaz Shabbir () and Muhammad Sabihuddin Butt
Authors registered in the RePEc Author Service: Muhammad Shahbaz

MPRA Paper from University Library of Munich, Germany

Abstract: This paper explores the effect of military expenditures on external debt in case of Pakistan over the period of 1973-2009. For this purpose, ARDL bounds testing approach is used to examine cointegration between the variables. ADF, P-P and ADF-GLS, Clemente et al. (1998) unit root tests are applied to check the order of integration of variables. OLS and ECM regressions approaches are employed to investigate marginal impact of military spending on external debt in long and short run. Our findings indicate cointegration which confirms long run relationship between military expenditures, external debt, economic growth and investment. The results reveal that a rise in military expenditures increases the stock of external debt. The inverse effect of economic growth on external debt is found and an increase in investment is also increasing external debt in the country. This study invites policy makers to approach the problem of curtailing external debt in innovative ways in case of Pakistan.

Keywords: Military Spending; External Debt; Cointegration (search for similar items in EconPapers)
JEL-codes: A10 (search for similar items in EconPapers)
Date: 2011-02-28, Revised 2011-04-21
New Economics Papers: this item is included in nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: Does Military Spending Explode External Debt in Pakistan? (2016)
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